Abstract: From the perspective of total factor productivity and financing constraints in heterogeneity enterprises, this paper conducts a study from both theoretical and empirical aspects of the reasons why Chinese export enterprises select processing trade. The theoretical analysis indicates that export firms with lower productivity and higher financing constraints tend to select processing trade. Then, this paper makes use of the corresponding data between Chinese Industrial Enterprise Database and China’s Customs Import and Export Database during 2000-2006 and employs the probit binary discrete choice model and the instrumental variable ivprobit model estimation method to conduct an empirical study. The results indicate that the higher degree of financing constraints and the lower productivity the export firms have, the stronger tendency they would have to select processing trade. The results of the robustness tests further show that the enterprises of processing trade with higher degree of financial constraints and lower productivity would enhance the strength of processing trade.

Key words: export enterprises; processing trade; productivity; financing constraints