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Local Crowding‐Out in China

Yi Huang, Marco Pagano () and Ugo Panizza

Journal of Finance, 2020, vol. 75, issue 6, 2855-2898

Abstract: In China, between 2006 and 2013, local public debt crowded out the investment of private firms by tightening their funding constraints while leaving state‐owned firms' investment unaffected. We establish this result using a purpose‐built data set for Chinese local public debt. Private firms invest less in cities with more public debt, with the reduction in investment larger for firms located farther from banks in other cities or more dependent on external funding. Moreover, in cities where public debt is high, private firms' investment is more sensitive to internal cash flow.

Date: 2020
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https://doi.org/10.1111/jofi.12966

Related works:
Working Paper: Local Crowding Out in China (2019) Downloads
Working Paper: Local Crowding Out in China (2019) Downloads
Working Paper: Local crowding out in China (2019) Downloads
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