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| External Demand Contraction, Trade Digitalization and Green Transformation of Exporting Firms
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| Peng Shuijun Fang Ying Zhu Pengyu |
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Abstract In the context of constructing a new pattern of “dual circulation” development, China’s macroeconomic objectives have shifted from high-speed growth to high-quality development, with the green transformation of development modes being a critical link in this process. The green transformation of China’s exporting firms is closely intertwined with changes in the external market environment. Currently, weakening external demand and declining orders constitute a primary challenge for China’s foreign trade sector. This paper utilizes micro-level data from Chinese manufacturing exporting firms spanning the period from 2000 to 2013 and constructs a negative external demand shock indicator at the firm level and a trade digitalization metric based on input-output analysis. This research empirically investigates the impact of external demand contraction on the pollution emission intensity of the exporting firms and its underlying mechanisms, with a particular emphasis on the moderating role of trade digitalization. The core findings are as follows: (1) External demand contraction significantly leads to an increase in the SO? emission intensity of exporting firms. (2) Mechanism analysis reveals that this effect operates primarily through several channels. The contraction results in reduced production scale and lower capacity utilization, which squeezes investments in pollution abatement and R&D innovation. Furthermore, survival pressures drive firms to adjust their trade patterns shifting from processing trade to ordinary trade and diversify their export product scope. These strategic adjustments always entail a more pollution-intensive product mix, consequently elevating overall emission intensity. (3) Further examination indicates that a higher degree of trade digitalization effectively mitigates the negative consequences of demand contraction. Specifically, inputs related to digital transactions enhance firms’ efficiency in searching for and penetrating new target markets, particularly in developing economies. This improved market access helps sustain capacity utilization and safeguards resources allocated for environmental investments. Simultaneously, investments in digital infrastructure facilitate the greening and quality enhancement of the export product structure, steering firms towards a more sustainable development trajectory.
Compared to existing literature, this paper offers several marginal contributions. First, it pioneers the investigation into the impact of external demand contraction on the green transformation of exporting firms, enriching the research on demand-side environmental influences and providing a novel perspective for understanding corporate behavior under survival pressure. Second, it innovatively integrates the concept of trade digitalization into the analytical framework concerning external demand shocks. It examines its moderating role, offering fresh insights and potential solutions for firms grappling with the dilemma of pursuing green transformation amidst adverse external conditions. Third, regarding indicator measurement, it meticulously devises a firm-level negative external demand shock indicator and a nuanced trade digitalization metric derived from input-output linkages, thereby enhancing the precision and reliability of the empirical findings.
In conclusion, this study furnishes robust empirical evidence and valuable policy implications for supporting exporting firms in navigating the challenges posed by external demand contraction and for fostering green transformation through strategic advancement of trade digitalization. It emphasizes the importance of enhancing firms’ internal resource management capabilities, establishing effective risk response mechanisms, and strengthening the synergy between trade and environmental policies. Ultimately, fully unleashing the potential of the digital economy is crucial for cultivating new competitive advantages in foreign trade and realizing high-quality, sustainable development.
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Published: 20 May 2026
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