Does the Chinese Banking System Promote the Growth of Firms?

Panicos Demetriades (), Jun Du (), Sourafel Girma () and Chenggang Xu

No 08/6, Discussion Papers in Economics from Department of Economics, University of Leicester

Abstract: Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

Keywords: Chinese banking system development; value added and TFP growth; panel dataset (search for similar items in EconPapers)
JEL-codes: E44 O53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cna, nep-cse, nep-eff, nep-fdg and nep-tra
Date: 2008-02
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