Climate effects on the diversification strategy of export firms: Evidence from China

including insurance and credit, facilitate intertemporal risk management, thereby reducing the impact of climate-related risks. However, climate adaptation entails significant costs and necessitates a cognitive framework that aids in understanding and addressing the complexities of climate change. For Chinese exporters, the extent of adaptation to local temperature condi- tions and the factors influencing the ability to adapt to climate change remain key issues. In the following sections, we address these issues through the lens of firms’ export diversification. The impact of a firm’s export trade mode China’s integration into the global value chain through its processing trade regime has been profound, significantly facilitating the transfer of industries from developed nations to develop- ing nations and enhancing the optimal allocation of global resources. This integration has markedly propelled China’s export growth [38]. Within the realm of international trade research, the "productivity puzzle" of Chinese export firms has generated considerable debate. Studies have revealed that, excluding processing trade firms, the productivity of Chinese export firms surpasses that of non-export firms, thereby resolving the productivity puzzle. This sug- gests that Chinese processing trade firms possess unique characteristics; their engagement in exports is not predicated on higher productivity but rather on an order-based production model that revolves around "importing raw materials and exporting finished products." These

firms are typically labor-intensive, exhibit low added value, and are highly substitutable, situat- ing them at the lower end of the international value chain. In contrast, general trade firms tend to be capital-intensive, prioritize brand development, operate on a larger scale, exhibit higher productivity, and face less restrictive financing constraints (Manova and Yu, 2016) [39]. Acknowledging the pronounced differences between these firm types, our analysis catego- rizes the sample into two distinct groups: processing trade firms (Ptrade group) and general trade firms (Gtrade group), conducting separate regressions for each. The outcomes of the group regressions are detailed in columns (1) and (2) of Table 5-I. The analysis shows that Fig 3. Impact of temperature on export diversification. https://doi.org/10.1371/journal.pone.0308391.g003 PLOS ONE Climate effects on the diversification strategy of export firms PLOS ONE | https://doi.org/10.1371/journal.pone.0308391 August 16, 2024 14 / 28