Export Performance and Credit Constraints in China

We investigate how the export performance of firms in China is influenced by credit constraints. Using panel data from Chinese customs for 1997-2007, we show that credit constraints restrict international trade flows and affect the sectoral composition of firms’ activity. We confirm that credit constraints provide an advantage to Foreign-owned firms and joint ventures over private domestic firms as their export performance is systematically greater in sectors with higher levels of financial vulnerability measured in a variety of ways. We however find that financial sector liberalization has partially reduced these distortions in exports over the period.