Public Policy Bulletin 16 inner page

HKUST Public Policy Bulletin Issue No.16

The impact of rainfall on productivity: Implications for Chinese manufacturing

 

Xiaodong Chen, Yatang Lin and Pengyu Zhu

 

 

Global climate change amplifies rainfall volatility, posing risks to China’s manufacturing sector— a global powerhouse accounting for 22% of world manufacturing output. Addressing gaps in macro-centric research, this study offers micro-level empirical evidence to guide targeted policy: support vulnerable firms (labor-intensive, low-tech, foreign-owned, and those in rainy regions), strengthen anti-flood, transportation, and drainage infrastructure in high-risk areas, and align environmental policies with SSP scenarios. These measures aim to mitigate future productivity and output losses, safeguarding sustainable industrial growth.

 

The study integrates ground station-level climate data (from China’s National Meteorological Information Center) and micro-data of 568,888 manufacturing firms (1998–2007) from the ASIF database (covering over 90% of China’s industrial output). It uses fixed-effects panel regression (controlling firm, industry, year fixed effects) and quadratic climate variable terms, with rainfall measured via annual/seasonal totals, bins (e.g., ≥250mm), anomalies, and lagged effects.

 

Robustness checks include adjusting econometric settings, controlling snowfall, and testing alternative rainfall bin references. Heterogeneity analysis covers sectors (labor/capital-intensive), ownership (state/foreign-owned), and regions (southern rainy/northwestern arid), with productivity validated via OP, LP, and labor productivity measures.

     

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    Authors

    Xiaodong Chen is a PhD Candidate in the Division of Public Policy at The Hong Kong University of Science and Technology. His work concentrates on topics including Agriculture, Environment and Development, with a strong interdisciplinary bent. He employs satellite data and remote sensing products extensively to inform policy-related inquiries. 

    Yatang Lin is an Associate Professor in the Department of Economics and the Division of Public Policy at the Hong Kong University of Science and Technology (HKUST), where she also serves as the Associate Director of the Center for Applied Economic, Social and Environmental Research. She received her PhD in Economics from The London School of Economics and Political Science in 2017. Her research interests encompass environmental economics, urban and regional economics, international trade, and economic growth and development. Dr. Lin has led two projects funded by the Research Grants Council (RGC). Her work has appeared in leading academic journals, including the AEJ:Policy, Journal of Public Economics, Journal of Urban Economics. 

    Pengyu Zhu is a Professor in the Division of Public Policy at Hong Kong University of Science and technology (HKUST). He is also the Director of the Center for Applied Economic Social and Environmental Research, Associate Director of GREAT Smart Cities Institute. He has taught courses on transportation and land use, transportation economics, economics applications to planning and policy, urban economics, urban geography, quantitative research methods, and urban design and site planning studios. To date, his work has been published in major academic journals such as Landscape and Urban Planning, Urban Studies, Annals of Regional Sciences, Transportation, Transportation Research Part A/D, Urban Geography, Cities,. He was also among the world’s top 2% scientists in 2023 and top 1% in 2024, based on TopResearchersList.com ranking by Elsevier and Stanford University. In recognition of his outstanding achievements and academic excellence, Prof. Zhu has been recently awarded 5.2 million HKD and conferred the esteemed title of “RGC Research Fellow”, a prestigious recognition from the Hong Kong Research Grants Council (RGC) under their Research Fellow Scheme (RFS) in support of only the most outstanding scholars in Hong Kong.

     

     

    Further reading

    Chen, X., Lin, Y., & Zhu, P. (2025). “The impact of rainfall on productivity: Implications for Chinese manufacturing.” Journal of Comparative Economics, 53(2), 389–411.https://doi.org/10.1016/j.jce.2025.03.005