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Financial constraints in China : firm-level evidence

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  • Sandra, PONCET

    (Centre d'Economie de la Sorbonne, Université Paris 11 and CEPII, France)

  • Walter, STEINGRESS

    (Boston College, US)

  • Hylke, VANDENBUSSCHE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

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 face by 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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Bibliographic Info

Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2008048.

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Length: 28
Date of creation: 01 Dec 2008
Date of revision:
Handle: RePEc:ctl:louvec:2008048

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Keywords: Investment cashflow sensitivity; China; firm level data; foreign direct investment;

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