Chinese Firms' Productivity and Markup Rates

Under the dual backdrop of escalating corporate competitive pressures and China's domestic efforts to build a consumption-oriented society, domestic enterprises need to continuously increase their markup rates while persistently reducing marginal costs to enhance product competitiveness and market power. An increasing number of scholars are now focusing on the importance of corporate markup rates, adopting diverse methodologies to quantify these rates and studying how to improve them to provide better guidance for micro-level enterprises, particularly micro and small businesses. The enhancement of enterprise productivity relies on multiple factors, including wage and benefit growth, the adoption of automation, and improvements in societal average productivity, all of which influence cost markup rates through various pathways. To investigate these dynamics, this study employs microdata from the 2000–2006 China Industrial Enterprise Database at the firm level and adopts an empirical approach to examine the impact of enterprise productivity on markup rates. The research demonstrates that enterprises should focus on improving productivity to elevate their markup rates, thereby achieving enhanced competitiveness and reduced marginal costs.