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

effects attributed to the financial system alone. To investigate this, the sample is segmented into less developed cities (Developing group) and developed cities (Developed group) based on the median gross domestic product (GDP) of the firms’ locations, and regressions are run for each group. The results are shown in columns (1) and (2) of Table 5-II. The regression results indicate that firms in developed cities are more likely to reduce the diversity of export products under extreme temperatures, while those in less developed cities tend to maintain or even increase their diversification strategies, with some temperature conditions promoting a posi- tive effect. This suggests that the positive moderating role of financial development is not driven by the level of economic development. Conversely, economic growth does not seem to improve the adaptability of local firms to extreme disasters. To clarify why firms in more developed cities are more affected, the sample of these cities is further divided into low-energy consumption cities (Lenergy group) and high-energy con- sumption cities (Henergy group), using the median of energy consumption per unit of GDP as a criterion. This indicator is derived from provincial energy consumption divided by provin- cial GDP, reflecting energy consumption per unit of economic output. Since adaptation to extreme temperatures for businesses and residents often relies on energy-intensive tools such as air conditioning or heating systems, it was hypothesized that higher energy consumption

could facilitate adaptation to extreme temperatures, potentially offsetting the negative regula- tory effects of temperature impacts on economically advanced cities. Specifically, regressions were run separately for high and low-energy consumption cities within the developed city cat- egory. The results, presented in columns (3) and (4) of Table 5-II, show that in areas with lower energy consumption, the diversification of firms’ export products decreases signifi- cantly, while the opposite is true for areas with higher energy consumption, suggesting that energy consumption enhances the ability of firms to adapt to extreme temperatures. Impact of firms’ location Scholars generally believe that short-term impacts can be mitigated in the long term through behavioral adjustments of economic agents, leading to adaptability (Hornbeck, 2012). This study delves into the development of temperature adaptability across different regions in China, a nation characterized by substantial latitude and temperature gradients. Specifically, we scrutinize whether northern China, which experiences lower average temperatures and fre- quent cold weather, has greater adaptability to low-temperature shocks, and whether southern China, with its higher average temperatures and frequent hot weather, is more adept at coping with high-temperature shocks. Our analysis classifies Chinese cities into southern and northern regions based on eco- nomic geography. The southern regions include Shanghai, Jiangsu, Zhejiang, Anhui, Fujian,

Jiangxi, Hubei, Hunan, Guangdong, Guangxi Zhuang Autonomous Region, Hainan, Chong- qing, Sichuan, Guizhou, Yunnan, and Tibet Autonomous Region. The northern regions include Beijing, Tianjin, Hebei, Shanxi, Inner Mongolia Autonomous Region, Liaoning, Jilin, Heilongjiang, Shandong, Henan, Shaanxi, Gansu, Qinghai, Ningxia Hui Autonomous Region, and Xinjiang Uygur Autonomous Region. This analysis excludes Hong Kong, Macau, and Tai- wan. We then conduct grouped regressions, as shown in Table 5-Ш. Column (1) shows results for firms in northern cities, where both low and high temperatures exert insignificant impacts. Column (2) presents results for firms in southern cities, which are the epicenter of China’s trade firms and the primary driver of our findings. High temperatures are found to signifi- cantly diminish the diversity of export products, suggesting that southern cities have not yet achieved effective adaptation to high temperatures. Considering China’s current economic geography, marked by a more robust southern region and a relatively weaker northern PLOS ONE Climate effects on the diversification strategy of export firms PLOS ONE | https://doi.org/10.1371/journal.pone.0308391 August 16, 2024 18 / 28