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FDI and credit constraints: firm level evidence from China

  • Sandra Poncet

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Jérôme Héricourt

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - PRES Université Lille Nord de France - Université de Lille, Sciences Humaines et Sociales - Université de Lille, Sciences et Technologies - Université de Lille, Droit et Santé)

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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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 in Economic Systems, Elsevier, 2009, 33 (1), pp.1-21. <10.1016/j.ecosys.2008.07.001>
Handle: RePEc:hal:cesptp:hal-00633901
DOI: 10.1016/j.ecosys.2008.07.001
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00633901
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