U.S. Dollar Debt Issuance by Chinese Firms

44 Pages Posted: 4 Oct 2016

See all articles by Murray Z. Frank

Murray Z. Frank

University of Minnesota

Tao Shen

Tsinghua University

Date Written: September 30, 2016

Abstract

From 2000 to 2015 there was a large increase in U.S. dollar debt issues by Chinese firms. Financial policy makers have been concerned about potentially serious negative consequences from this rapid growth in foreign currency corporate debt. We first observe that the average growth rate of these debts is reasonably similar to the growth of the Chinese economy itself and markedly slower than the growth of Yuan bonds. The firms undertaking U.S. debt issues have leverage reductions, not increases, despite the extra debt issued. These firms also increase real investment which may help to account for the leverage decline. There is little support for the idea that these Chinese firms are undertaking carry trade.

Keywords: debt issuance, capital control, corporate investment

JEL Classification: F34, G30, F38

Suggested Citation

Frank, Murray Z. and Shen, Tao, U.S. Dollar Debt Issuance by Chinese Firms (September 30, 2016). Available at SSRN: https://ssrn.com/abstract=2847061 or http://dx.doi.org/10.2139/ssrn.2847061

Murray Z. Frank

University of Minnesota ( email )

Carlson School of Management
321 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5678 (Phone)

Tao Shen (Contact Author)

Tsinghua University ( email )

Department of Finance
School of Economics and Management
China

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