Export expansion, demand for external finance, and regional financial development: Evidence from China

Dahai Fu, Yi Lu and Shufei Wang

Journal of Comparative Economics, 2026, vol. 54, issue 1, 248-272

Abstract: Why did China’s export boom not boost its financial development? This paper offers a novel explanation from a regional perspective. We leverage variations in industries’ external finance dependence (EFD) and decompose a region’s export shock into two additive subcomponents: high-EFD and low-EFD export shocks. Our findings reveal that the export expansion of high-EFD industries significantly enhances financial development, while that of low-EFD industries diminishes it. Therefore, the lack of response in China’s financial development to its export expansion stems from the prevalence of regions specializing in low-EFD industries. Our study highlights the importance of accounting for industry-specific variations in external finance dependence when analyzing the demand effects of regional export expansion.

Keywords: Regional export expansion; Financial demand; Financial development; China (search for similar items in EconPapers)
JEL-codes: F10 G20 O16 O18 O19 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:54:y:2026:i:1:p:248-272

DOI: 10.1016/j.jce.2025.11.001

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