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Determinants of credit constraints for agricultural wholesalers in China

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  • Hu, Lifang
  • Lopez, Rigoberto A.
  • Zeng, Yinchu

Abstract

Following market reforms and economic growth since the late 1970s, agricultural wholesale markets in China have developed substantially and become increasingly important in food distribution. This paper investigates the determinants of credit constraints on agricultural wholesalers. A probit model with sample selection is estimated for credit constraints and demand using data collected via a nationwide survey of 1,422 agricultural wholesalers, of whom approximately 39% were designated as credit-constrained. Empirical results confirm that an absence of relatives in the business supports the notion of further discouraging potential borrowers from applying for credit in the first place. Moreover, the probability of being credit-constrained is significantly lower for legal corporations, wholesalers who have higher-value capital assets, larger-sized wholesalers, and those in a better micro-finance environment. Some policy implications are outlined.

Suggested Citation

  • Hu, Lifang & Lopez, Rigoberto A. & Zeng, Yinchu, 2020. "Determinants of credit constraints for agricultural wholesalers in China," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 23(4), June.
    • Handle: RePEc:ags:ifaamr:307604
    DOI: 10.22004/ag.econ.307604
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