Variable definitions.

China is actively promoting the development of a robust trading nation. In this context, utilizing data from China’s A-share listed companies spanning from 2003 to 2021, this study investigates the impact of foreign shareholders on enterprises in a scenario where overseas sales reduce the profit margin of Chinese firms. The findings reveal that overseas sales do indeed decrease the profit margin of Chinese enterprises; however, foreign shareholders mitigate this negative effect and various robustness tests support this conclusion. Mechanism analysis confirms that foreign shareholders primarily enhance enterprise productivity through improved production technology spillover effects, thereby alleviating the adverse impact of overseas sales on Chinese firms’ profit margins. Heterogeneity analysis demonstrates that both longer holding periods for foreign shareholders and multiple foreign shareholders significantly alleviate the negative influence of overseas sales on Chinese firms’ profit margins. Moreover, there is significant heterogeneity in how foreign shareholders alleviate these detrimental consequences based on property rights nature, institutional environment, overseas related party transactions and subsidiaries, as well as industry attributes. These findings have important reference value for China’s efforts towards becoming a strong trading nation and can contribute to enhancing trade capacity in other countries.