Relations And Financing Of None-State-Owned Enterprises In Chinese Transition

Chinese transition from Planned Economy to Market Economy began in 1978. In the period of transition, Chinese none-state-owned sector grows fast, and has made great achievements, however, it is difficult for Chinese none-state-owned enterprises (NSOEs) to finance from financial institutions such as banks when they develop, which put too many NSOEs into financial distress.Relations arise when markets are not complete or laws are not perfect. Economic agents like more utility or return, and abhor risk. Economic agents will use relations to evade risk over periods and to speculate when markets are not complete or laws are not perfect or people can't evade risk. Relations sometimes are helpful for social welfare to a certain extent, and the cost of relations grows accelerated, when the cost overcomes the benefit of the social welfare, relations will induce the depravation of social welfare. Therefore, we should inspirit the establishments of relations to a certain extent and avert the negative influence of relations.In the period of transition, Chinese NSOEs' environment is special. Chinese markets are far less complete, law system is far less perfect, and financial system is far less developed either. In the face of the environment, Chinese NSOEs have chances and large motive to establish relations with their stakeholders, and to finance by relations. First, the NSOEs will establish intimate relations with government and its officers to help the government and its officers to realize their aims so that the enterprises can win help of government, because government still have too many kinds of powers, control too many resources and affect the distributions of social welfare; Second, the NSOEs will establish intimate relations with financial institutes such as banks to eliminate asymmetry between them so that the enterprises can get credit through the normal financial channels; Third, the NSOEs will establish intimate relations with their suppliers and customers so that they can win the help of trade associates to eliminate their risk, especially can win trade credit from their suppliers. In this article, I have set up models to illustrate the intimate relations between the NSOEs and government, and to illustrate the relational financing relations between economic agents.In the article, I did experimental tests with financial data of Chinese NSOEs, and found that the relations affect the NSOEs' financing. First, the experimental results showed that relations between the NSOEs and government affect the NSOEs' financial structure. The more intimate the relation between the NSOE and government is, the larger the debt ratio of the NSOE is, the more credit the NSOE can get from banks. In the early period of transition, the more intimate the relation is, the more capital the NSOE can get from government.Second, the experimental results showed that relations between the NSOEs and banks affect the NSOEs' credit from banks. The more intimate the relation is, the more credit the NSOE can get from banks. In the early period of transition, the relations are important factors that affect credit from banks, while the profitability of the enterprise is not important.Third, the experimental results showed that relations between the NSOEs and their suppliers affect the NSOEs' trade credit from banks. In the course of trade credit, the suppliers are passive. The more intimate the relations between the suppliers and their customers are, the more trade credit the suppliers will provide; the more intimate the relations between the suppliers and their biggest customers are, the less the default there is. The more intimate the relations between the NSOE and their suppliers are, the more trade credit the NSOE can get. I found that the influence of relations on trade credit is remarkable recently more than in early period.