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What are the Sources of Financing of the Chinese Firms?


Galina Hale


Federal Reserve Bank of San Francisco

Cheryl X. Long


Colgate University - Economics Department

July 30, 2010

HKIMR Working Paper No.19/2010

Abstract:     
It appears to be common knowledge that external financing in China is mostly limited to state-owned firms and is hard to obtain for smaller private firms. In this paper we take a closer look at internal and external, formal and informal, financing sources of Chinese firms during the period of rapid economic reform in 1997 – 2006. To this end we analyze balance-sheet data from Chinese Industrial Surveys of Medium-sized and Large Firms for 2000-2006 and survey data from the Large-Scale Survey of Private Enterprises in China that was conducted in 1997, 2000, 2002, 2004, and 2006.

The following stylized facts emerge from our analysis: (1) State-owned firms continue to enjoy significantly more generous external finances than other types of Chinese firms; (2) Chinese private firms have resorted to various ways to overcome financial constraints, including increasingly more mature informal financial markets, cost-saving through lower inventory and other working capital requirements, and greater reliance on retained earnings; (3) There are substantial variations in financial access among private firms: While the small private firms face more financial constraints, the more established large private firms seem to have access to finances that are more equal to their SOE counterparts; and, (4) There is some evidence that financial access of small private firms, especially to formal bank loans, has improved moderately in the past decade.

Number of Pages in PDF File: 33

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Date posted: September 20, 2010  

Suggested Citation

Hale, Galina and Long, Cheryl X., What are the Sources of Financing of the Chinese Firms? (July 30, 2010). HKIMR Working Paper No.19/2010. Available at SSRN: http://ssrn.com/abstract=1679535 or http://dx.doi.org/10.2139/ssrn.1679535

Contact Information

Galina Hale (Contact Author)
Federal Reserve Bank of San Francisco ( email )
101 Market Street
San Francisco, CA 94105
United States
415-974-3131 (Phone)
415-974-2168 (Fax)
HOME PAGE: http://www.sf.frb.org/economics/economists/index.html
Cheryl X. Long
Colgate University - Economics Department ( email )
13 Oak Drive
Hamilton, NY 13346
United States
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