Banking deregulation and export product quality

This paper investigates the causal effect of banking deregulation on export product quality using two large and detailed datasets, the China Industrial Enterprise Database and the China Customs Database. We find that a 10% increase in banking deregulation is associated with a 0.78% increase in export quality. The result is robust even after replacing the estimation method, changing variable measurement, and addressing endogeneity problems. The effect is more pronounced for firms that depend on external finance, have higher productivity and capital intensity, engage in general trading, and face higher marketization and competition. Banking deregulation enhances export product quality through channels that ease financial constraints, improving resource allocation efficiency and reducing risk exposure. This paper provides a better understanding of how economic market reform is conducing to upgrading export product quality and fostering export upgrading and global competitiveness. •Evidence is limited on how banking deregulation affects firms' export product quality in China.•We find that banking deregulation leads to higher technology exports in China.•Economic channels include eased financing constraints, improved resource allocation efficiency, and reduced risk exposure.•The effect is manifest for firms with more external finance, higher productivity and capital intensity, and general trading.•Firms in more competed industries and higher marketized regions benefits more from banking deregulation.