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Global value chain position, industrial policy, and bank loan allocation: Evidence from Chinese manufacturing firms

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  • Liu, ShiYi
  • Liu, HaiYue
  • Li, WeiKe

Abstract

The rapid expansion of global value chains (GVCs) has deepened interconnections among countries and regions and reshaped industrial strategies and domestic capital allocations. Using a dataset of 2600 listed manufacturing firms in China from 2005 to 2020, this study finds that firms in industries that have lower GVC positions (LGPI firms), such as new energy, aerospace, and advanced materials, obtain a greater number of bank loans, particularly medium- and long-term loans and policy bank loans. The relationship is more pronounced for firms in regional strategic pillar and technology-intensive industries, state-owned firms, and those with lower operational risks and stronger debt repayment capacity. The main mechanisms include a compensatory effect (compensation for emerging strategic firms), a strategic response effect (response to the China-U.S. trade friction), and a technological support effect (support for firm R&D and digital transformation). The economic consequence tests indicate that the higher number of bank loans allocated to LGPI firms improves their total factor productivity and innovation patent output. Collectively, our findings reveal the evolving GVC competitiveness in China's manufacturing sector and the significant role financial institutions play in strengthening these less dominant but strategically important industries.

Suggested Citation

  • Liu, ShiYi & Liu, HaiYue & Li, WeiKe, 2025. "Global value chain position, industrial policy, and bank loan allocation: Evidence from Chinese manufacturing firms," China Economic Review, Elsevier, vol. 94(PB).
    • Handle: RePEc:eee:chieco:v:94:y:2025:i:pb:s1043951x25002330
    DOI: 10.1016/j.chieco.2025.102575
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    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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