Government Credit and International Trade

Using transaction-level trade data from China Customs and loan data from the China Development Bank (CDB), we find that CDB credit to strategic industries at the top of supply chains leads to lower prices, higher volume, and more product varieties and destinations for exports for firms in downstream industries. These positive spillovers stem from reduced intermediate goods prices and increased trade credit from upstream to downstream firms caused by CDB loans. Notably, this surge in import activity displaces U.S. firms within the same industry but bolsters downstream U.S. firms' business performance and employment.

Keywords: JEL: E51, F14, G28, G30, H81 Government Credit, Export, Supply Chain, Trade War

JEL Classification: E51, F14, G28, G30, H81

Suggested Citation: Suggested Citation

Ru, Hong and Yang, Endong, Government Credit and International Trade (May 27, 2024). Journal of Financial and Quantitative Analysis, forthcoming, Available at SSRN: https://ssrn.com/abstract=3324019 or http://dx.doi.org/10.2139/ssrn.3324019