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FDI and credit constraints: firm level evidence from China

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  • Sandra Poncet

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

  • Jérôme Héricourt

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies - Université Lille II - Droit et santé - Université Lille III - Sciences humaines et sociales - PRES Université Lille Nord de France)

Abstract

In this paper, we assess the success of the ongoing financial system reforms in China by investigating the extent to which firms are financially constrained. We focus on the role played by Foreign Direct Investment (FDI) in funding the Chinese corporate sector, and analyze whether incoming foreign investment in China plays an important role in alleviating domestic firms' credit constraints. Using firm-level data on 1300 domestic companies over the period 2000-2002, we confirm that the development of cross-border relationships with foreign firms helps private domestic firms to bypass both the financial and legal obstacles that they face at home.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00633901.

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Date of creation: 2009
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Publication status: Published, Economic Systems, 2009, 33, 1, 1-21
Handle: RePEc:hal:cesptp:hal-00633901

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Keywords: Financial constraint; Corporate finance; Foreign Direct Investment; China;

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