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Credit allocation in China: firm-level evidence

Author

Listed:
  • Sandra Poncet

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Walter Steingress

    (Department of Economics - BU - Boston University [Boston])

  • Hylke Vandenbussche

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

This paper uses a unique micro-level data-set on Chinese firms to test for the existence of a "political-pecking order" in the allocation of credit. Our findings are threefold. Firstly, private Chinese firms are credit constrained while State-owned firms and foreign-owned firms in China are not; Secondly, the geographical and sectoral presence of foreign capital alleviates credit constraints faced by private Chinese firms. Thirdly, geographical and sectoral presence of state firms aggravates financial constraints for private Chinese firms ("crowding out"). Therefore it seems that ongoing restructuring of the state-owned sector and further liberalization of foreign capital inflows in China can help to circumvent financial constraints and can boost the investment of private firms.

Suggested Citation

  • Sandra Poncet & Walter Steingress & Hylke Vandenbussche, 2009. "Credit allocation in China: firm-level evidence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00747355, HAL.
    • Handle: RePEc:hal:cesptp:hal-00747355
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    Cited by:

    1. Robert C. Feenstra & Zhiyuan Li & Miaojie Yu, 2014. "Exports and Credit Constraints under Incomplete Information: Theory and Evidence from China," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 729-744, October.

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