Business, Management and Accounting
8 years ago

Trade credit in China boosts private enterprise financing, weakens state-owned companies.

Advances in intelligent systems and computing
The Substitution Effect of Trade Credit Financing in an Emerging Economy: Empirical Evidence from China
Qianwei Ying, Wanqing Guo, Tian Yang

Paper Summary

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Trade credit is an important way for companies in China to get money quickly. A study looked at data from Chinese companies between 1998 and 2009. They found that trade credit can replace bank loans for private companies more than for state-owned ones. Also, in places with better financial systems, trade credit is less important. As China's financial system gets better, trade credit will become less important for all companies.