Bank Financing in China's Private Sector: The Payoffs of Political Capital

Wubiao Zhou

World Development, 2009, vol. 37, issue 4, 787-799

Abstract: Summary In Reform Era China, bank financing plays a significant role in entrepreneurial development, despite a severe information asymmetry problem and a discriminatory legal/regulatory environment. This paper offers a political explanation for how Chinese entrepreneurs obtain bank loans by arguing that entrepreneurs actively invest in political capital to overcome bank financing obstacles. Pursuing membership in the legislative or semi-legislative organs of the Chinese government is an effective strategy for private entrepreneurs to obtain political capital. Empirical analysis suggests that a legislative membership helps entrepreneurs get access to bank loans; and it may be more useful for small and medium enterprises.

Keywords: Asia; bank; financing; China; entrepreneur; legal; and; regulatory; constraints; political; capital (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)

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