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Financial constraints in China : firm-level evidence

Author

Listed:
  • 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

Suggested Citation

  • Sandra, PONCET & Walter, STEINGRESS & Hylke, VANDENBUSSCHE, 2008. "Financial constraints in China : firm-level evidence," Discussion Papers (ECON - Département des Sciences Economiques) 2008048, Université catholique de Louvain, Département des Sciences Economiques.
    • Handle: RePEc:ctl:louvec:2008048
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    More about this item

    Keywords

    Investment cashflow sensitivity; China; firm level data; foreign direct investment;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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