Two Forms of Trade Credit Finance in China

Go Yano and Maho Shiraishi ()
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Maho Shiraishi: Faculty of Foreign Studies, The University of Kitakyushu, 4-2-1, Kitagata, Kokuraminami-ku, Kitakyushu 802-8577, Japan.

Comparative Economic Studies, 2016, vol. 58, issue 1, 60-92

Abstract: This paper investigates which forms of trade credit finance which corporate activities of non-state-owned enterprises in China, comparing coastal and interior areas. Using firm-level panel data for 1998–2007, we find: (1) trade credit in China supports investment by non-state owned-enterprises; (2) trade credit in the form of notes and accounts payable is more developed and actively used to finance investment in the coastal areas compared with the interior; and (3) the dominant and significant form of trade credit changes from deposits received to notes and accounts payable, likely driven by development of interfirm trust and increasing market competitiveness.

Date: 2016
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