Financial Constraints in China: Firm-Level Evidence

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Financial Constraints in China: Firm-Level Evidence

Author Info

Poncet, Sandra
Steingress, Walter
Vandenbussche, Hylke

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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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7132.

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Date of creation: Jan 2009
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Handle: RePEc:cpr:ceprdp:7132

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Paper
- Poncet, Sandra & Steingress, Walter & VANDENBUSSCHE, Hylke, 2008. "Financial constraints in China: firm-level evidence," CORE Discussion Papers 2008079, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
- Sandra Poncet & Walter Steingress & Hylke Vandenbussche, 2008. "Financial constraints in China: firm-level evidence," LICOS Discussion Papers 22608, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
- Sandra, PONCET & Walter, STEINGRESS & Hylke, VANDENBUSSCHE, 2008. "Financial constraints in China : firm-level evidence," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2008048, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]

Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-02-28 (All new papers)
NEP-CNA-2009-02-28 (China)
NEP-MAC-2009-02-28 (Macroeconomics)
NEP-TRA-2009-02-28 (Transition Economics)

References listed on IDEAS
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