Dynamics of Trade Credit in China

Wukuang Cun, Vincenzo Quadrini, Qi Sun and Junjie Xia

The Economic Journal, 2022, vol. 132, issue 648, 2702-2736

Abstract: We use Chinese manufacturing data to show that upstream manufacturing industries received higher credit during the monetary expansion of 2005–11. However, the higher credit received by upstream industries did not generate a similar increase in ‘trade lending’ to downstream industries, which limited the transmission of the credit expansion to the whole manufacturing sector. We develop a model that formalises some of the key features of the Chinese economy, and show why a credit expansion tilted toward the upstream sector may not fully cascade to the whole economy.

Date: 2022
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