Financial Constraints in China: Firm-Level Evidence

LICOS Discussion Paper No. 226/2008

26 Pages Posted: 18 Mar 2009

See all articles by Sandra Poncet

Sandra Poncet

Université Paris I Panthéon-Sorbonne - TEAM; Université Paris I Panthéon-Sorbonne; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Walter Steingress

KU Leuven - Department of Economics

Hylke Vandenbussche

Catholic University of Leuven (KUL), CEPR

Multiple version iconThere are 2 versions of this paper

Date Written: 2008

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 faced by private Chinese firms. Thirdly, geographical and sectoral presence of state firms aggravates financial constraints for 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.

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

JEL Classification: E22, G32

Suggested Citation

Poncet, Sandra and Poncet, Sandra and Steingress, Walter and Vandenbussche, Hylke, Financial Constraints in China: Firm-Level Evidence (2008). LICOS Discussion Paper No. 226/2008, Available at SSRN: https://ssrn.com/abstract=1360704 or http://dx.doi.org/10.2139/ssrn.1360704

Sandra Poncet

Université Paris I Panthéon-Sorbonne - TEAM ( email )

106-112 boulevard de l'hôpital
Cedex 13 Paris, P75647
France

HOME PAGE: http://team.univ-paris1.fr/teamperso/sponcet/

Université Paris I Panthéon-Sorbonne ( email )

12, place du Panthéon
Paris, IL
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 Rue Georges Pitard
Paris Cedex 15, F-75015
France

Walter Steingress

KU Leuven - Department of Economics ( email )

Leuven, B-3000
Belgium

Hylke Vandenbussche (Contact Author)

Catholic University of Leuven (KUL), CEPR ( email )

Faculty of Economics
Naamsestraat 69
B-3000 Leuven, 3000
Belgium
+32 16 326 920 (Phone)
+32 16 326 732 (Fax)

HOME PAGE: https://www.sites.google.com/site/vandenbusschehylke/home-1

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