Government credit and trade war

Ning Cai, Jinlu Feng, Yong Liu, Hong Ru and Endong Yang

No 7/2019, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: By merging transaction-level trade data from China Customs and loan data from the China Development Bank (CDB), we analyze the effects of government credit on trade activities. We find that CDB credit mainly flows to SOEs in strategic industries at the top of the supply chain. These up-stream loans lead to the lower price and higher amount of export goods of private firms in down-stream industries, which leads to decreases in employment and performance of the US firms in the same industry. In contrast, the US firms in downstream industries use cheaper intermediate goods imported from China and perform better subsequently.

Keywords: government credit; export; supply chain; trade war (search for similar items in EconPapers)
JEL-codes: E51 F30 G21 G28 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2019_007

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