As a widely used trade promotion policy, the export tax rebate policy strongly contributes to export prosperity. However, does it also inevitably reduce domestic demand? Obviously, splitting the decisions of exports and domestic sales makes it difficult to clearly examine the real impact of the export tax rebate policy. More importantly, if upstream domestic firms choose to export under the stimulus of the export tax rebate policy, this will make it more difficult for downstream domestic customers to obtain the necessary supply of inputs timely, which will bring a negative impact on the production and operation activities of downstream domestic customers.

Based on the customer-supplier data from 2004 to 2015, this paper examines the impact of the export tax rebate policy on the customer distribution of listed companies. The results show that: This policy significantly reduces the sales revenue of firms in the domestic market while promoting their exports. The substitution of exports for domestic sales depends critically on firms’ output adjustment capacity and customer stickiness. The increase in the export tax rebate rate of upstream industries will lead to a decrease and concentration of downstream firms’ purchase from domestic suppliers, and the uncertainty of export tax rebates in upstream industries will make downstream firms’ purchase from suppliers more dispersed.

This paper has the following contributions: (1) It reminds us that sustained and stable economic growth requires an effective balance between the demands of domestic and foreign markets, and export prosperity cannot be achieved at the expense of the shrinking of the domestic market. (2) It emphasizes the importance of output adjustment capacity and customer stickiness, which is conducive to a more comprehensive understanding on the intrinsic relationship and substitution principle between exports and domestic sales. (3) It supports that the export tax rebate policy, as a foreign trade policy, will continuously impact and spread through the domestic trade network. This means that we should pay attention to the negative effect of export tax rebates in upstream industries on downstream domestic customers’ purchase of inputs, so as to better coordinate and balance the potential impact of trade policies on the demand of the domestic market and the organization of firm production.