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Financial Development and Patterns of Industrial Specialization: Evidence from China

Author

Listed:
  • Qing He
  • Chang Xue
  • Chenqi Zhu

Abstract

This article investigates the influence of financial development on patterns of industrial specialization across China’s regions. We find that industrial sectors reliant on access to external finance tend to concentrate in regions with well-developed financial markets. Both foreign direct investment (FDI) and alternative financing channels are shown to play significant roles in shaping patterns of industrial specialization in China. In contrast, proxies for formal financial markets, for example, the banking system and capital markets, have few effects on regional industrial agglomeration. This result remains robust to instrumental variable estimation, alternative model specifications, and controlling for other traditional determinants of regional specialization.

Suggested Citation

  • Qing He & Chang Xue & Chenqi Zhu, 2017. "Financial Development and Patterns of Industrial Specialization: Evidence from China," Review of Finance, European Finance Association, vol. 21(4), pages 1593-1638.
    • Handle: RePEc:oup:revfin:v:21:y:2017:i:4:p:1593-1638.
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    Cited by:

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    8. Juanmei Zhou & Fenfang Cui & Wenli Wang, 2022. "The Spatial Effect of Financial Innovation on Intellectualized Transformational Upgrading of Manufacturing Industry: An Empirical Evidence from China," Sustainability, MDPI, vol. 14(13), pages 1-22, June.
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    14. Ma, Sichao & Shen, Ji & Wang, Fanzhi & Wu, Wanting, 2022. "A tale of two Us: Corporate leverage and financial asset allocation in China," International Review of Financial Analysis, Elsevier, vol. 83(C).
    15. He, Qing & Li, Xiaoyang, 2020. "The failure of Chinese peer-to-peer lending platforms: Finance and politics," BOFIT Discussion Papers 27/2020, Bank of Finland Institute for Emerging Economies (BOFIT).
    16. Bai, Yiyi & Dang, Tri Vi & He, Qing & Lu, Liping, 2018. "Does lending relationship help or alleviate the transmission of liquidity shocks? Evidence from a liquidity crunch in China," BOFIT Discussion Papers 13/2018, Bank of Finland, Institute for Economies in Transition.
    17. He, Qing & Xue, Chang & Zhou, Shaojie, 2019. "Does contracting institution affect the patterns of industrial specialization in China?," China Economic Review, Elsevier, vol. 54(C), pages 191-203.
    18. Guangyu Huang & Fei Ye & Yina Li & Lujie Chen & Minhao Zhang, 2023. "Corporate social responsibility and bank credit loans: Exploring the moderating effect of the institutional environment in China," Asia Pacific Journal of Management, Springer, vol. 40(2), pages 707-742, June.
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    20. Fan, Haichao & Li, Chang & Xue, Chang & Yu, Miaojie, 2023. "Clan culture and patterns of industrial specialization in China," Journal of Economic Behavior & Organization, Elsevier, vol. 207(C), pages 457-478.
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    More about this item

    Keywords

    Financial development; Alternative 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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