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The choice of formal or informal finance: Evidence from Chengdu, China

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  • Zhang, Guibin
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    Abstract

    China's economic development since 1978 has been fuelled largely by a new private sector which is supported by both formal and informal financing channels. Although there is still a debate on the role of alternative financing mechanisms, the existence of such practices in China is accepted in the literature. This paper looks into the socio-economic patterns of private entrepreneurs regarding the choice of formal or informal finance, using survey data from Chengdu, China. Both the logit and ordered logit model are employed to examine the hypothesised factors. The results show that reputation and relationships play important roles in formal financing of the small private firms in China.

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    Bibliographic Info

    Article provided by Elsevier in its journal China Economic Review.

    Volume (Year): 19 (2008)
    Issue (Month): 4 (December)
    Pages: 659-678

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    Handle: RePEc:eee:chieco:v:19:y:2008:i:4:p:659-678

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    Web page: http://www.elsevier.com/locate/chieco

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    Keywords: C42 E26 O17 R51 Informal economy Formal and informal sectors Private businesses in China Informal finance;

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    Cited by:
    1. Xiangping Jia & Franz Heidhues & Manfred Zeller, 2010. "Credit rationing of rural households in China," Agricultural Finance Review, Emerald Group Publishing, vol. 70(1), pages 37-54, May.
    2. Zhang, Heather Xiaoquan & Loubere, Nicholas, 2013. "Rural finance, development and livelihoods in China," Duisburger Arbeitspapiere Ostasienwissenschaften 94/2013, University of Duisburg-Essen, Institute of East Asian Studies IN-EAST.

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