This study investigates the impact of China’s 2004 Minimum Wage Regulations on the export performance of the forest products industry. Exploiting the nationwide implementation of the regulations as a quasi-natural experiment, we apply a difference-in-differences approach to a large firm-level panel from the Annual Industrial Survey Database. The results show that the minimum wage policy exerted a statistically significant negative effect on exports in the short run. Mechanism analysis reveals that firms responded by raising capital intensity while experiencing slower growth in average wages, alongside reductions in fixed asset investment and leverage. Although fixed asset investment declined significantly—contrary to the neoclassical prediction of labor-capital substitution—the policy appears to have induced efficiency improvements and structural adjustments among surviving firms. Heterogeneity analysis by ownership structure indicates that the negative export effect is present in both state-influenced and private firms, with some differences in adjustment magnitude and channels. Overall, the findings illustrate the dual role of minimum wage policies in labor-abundant emerging economies: they impose short-term costs on export competitiveness while potentially fostering long-term structural upgrading. These results offer important insights for policymakers seeking to balance worker protection with industrial competitiveness, and for foreign investors evaluating risks and opportunities in China’s forest products sector.
Guan et al. (2026) studied this question.