Regional Geopolitical Shocks and Supply Chain Adjustments of Heterogeneous Firms: Evidence from China

Based on data from China A-share listed companies and city-level levels from 2010 to 2023, this paper constructs a difference-in-differences model to examine how geopolitical shocks in 2018 influenced corporate supply chain adjustments through exposure level of city. The study finds that if the exposure is higher, the geopolitical shocks will correlates with a greater number of supply chain disruptions among enterprises. Further decomposition reveals significant increases in customer chain disruptions, supplier chain disruptions, and total chain disruptions. Meanwhile, the formation of new chains post-shock did not manifest as widespread supply chain restructuring, but rather as supplier-side restructuring—enterprises tended to prioritize adding new upstream suppliers to mitigate intermediate input constraints caused by damaged existing supply relationships. Heterogeneity analysis indicates that these effects are more concentrated in state-owned enterprises, enterprises with government-enterprise linkages, high-tech industries, and general cities and prefecture-level cities. Mechanism tests further reveal that financing constraints amplify the fragility of existing networks, thereby corresponding to chain-disruption effects; digital transformation, R&D and innovation, as well as declining supplier concentration and increasing diversification, primarily correspond to supplier restructuring effects. The study finds that geopolitical shocks affect corporate supply chain networks not simply as "contractions" or "expansions," but exhibit characteristics of "chain-disruption followed by restructuring, with repairs concentrated on suppliers." By integrating regional exposure levels with changes in corporate supply chain relationships, this paper expands the micro-level foundations for studying regional transmission of trade shocks and provides new empirical evidence for understanding the formation mechanisms of corporate supply chain resilience under external shocks.