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Does service trade liberalization relieve manufacturing enterprises’ financial constraints? Evidence from China

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  • Peng, Shuijun
  • Shu, Zhongqiao
  • Zhang, Wencheng

Abstract

A growing body of literature has discussed the effect of service trade liberalization on external financial constraints of enterprises in China. Based on a dataset of Chinese manufacturing firms and service trade restriction indices, we contribute to this discussion by analyzing how service trade liberalization affects financial constraints of Chinese enterprises through altering their ability to access external financing, as well as internal financing and commercial credit financing. We find that service trade liberalization alleviates financial constraints of Chinese enterprises through strengthening their ability to obtain both external and internal financing. There exist heterogeneous outcomes for different types of firms. While service trade liberalization eases exporters’ financial constraints, it deteriorates financial constraints of non-exporters through tightening their commercial credit financing. In addition, non-SOEs or SMEs gain from service trade liberalization through easing internal and external financing constraints while SOEs or large enterprises lose due to tightening commercial credit financing constraints.

Suggested Citation

  • Peng, Shuijun & Shu, Zhongqiao & Zhang, Wencheng, 2022. "Does service trade liberalization relieve manufacturing enterprises’ financial constraints? Evidence from China," Economic Modelling, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:ecmode:v:106:y:2022:i:c:s0264999321002996
    DOI: 10.1016/j.econmod.2021.105710
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    More about this item

    Keywords

    Service trade liberalization; Financial constraints; Manufacturing firms; SMEs;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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