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Financial development and patterns of industrial specialization: Regional evidence from China

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  • He, Qing
  • Xue, Chang
  • Zhu, Chenqi

Abstract

The paper investigates the influences of financial development on patterns of industrial specialization across China's regions. We find that industrial sectors reliant on access to external finance are found to concentrate in regions with developed financial markets. Both foreign direct investment (FDI) and informal financing channels are shown to play significant roles in shaping patterns of industrial specialization in China. In contrast, proxies for formal financial markets, e.g. the banking system and capital markets have few effects on regional industrial agglomeration. The role of financial development remains robust to instrumental variable estimation and controlling for other traditional determinants of regional specialization.

Suggested Citation

  • He, Qing & Xue, Chang & Zhu, Chenqi, 2014. "Financial development and patterns of industrial specialization: Regional evidence from China," BOFIT Discussion Papers 12/2014, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2014_012
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    More about this item

    Keywords

    financial development; informal finance; FDI; industrial specialization;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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