Global value chain position, industrial policy, and bank loan allocation: Evidence from Chinese manufacturing firms

ShiYi Liu, HaiYue Liu and WeiKe Li

China Economic Review, 2025, vol. 94, issue PB

Abstract: The rapid expansion of global value chains (GVCs) has deepened interconnections among countries and regions and reshaped industrial strategies and domestic capital allocations. Using a dataset of 2600 listed manufacturing firms in China from 2005 to 2020, this study finds that firms in industries that have lower GVC positions (LGPI firms), such as new energy, aerospace, and advanced materials, obtain a greater number of bank loans, particularly medium- and long-term loans and policy bank loans. The relationship is more pronounced for firms in regional strategic pillar and technology-intensive industries, state-owned firms, and those with lower operational risks and stronger debt repayment capacity. The main mechanisms include a compensatory effect (compensation for emerging strategic firms), a strategic response effect (response to the China-U.S. trade friction), and a technological support effect (support for firm R&D and digital transformation). The economic consequence tests indicate that the higher number of bank loans allocated to LGPI firms improves their total factor productivity and innovation patent output. Collectively, our findings reveal the evolving GVC competitiveness in China's manufacturing sector and the significant role financial institutions play in strengthening these less dominant but strategically important industries.

Keywords: Global value chain; Bank loan allocation; Total factor productivity; Strategic emerging industry; Industrial policy (search for similar items in EconPapers)
JEL-codes: F02 G21 O14 O32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:94:y:2025:i:pb:s1043951x25002330

DOI: 10.1016/j.chieco.2025.102575

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