Financial Development, Credit Constrain And China's Export

Since the Reform and Opening up, China has been a focus of the world attentionbecause of the economic accomplishment. The average of economic growth rate isdouble-digit, especially after China joined WTO, the international trade grows fast,which robustly support the expanding of China's economy. However, with theexplosion of financial crisis2008, the export of China is exposed to unprecedentedchallenges and pressures. Export is facing challenges of severe external environment,and meanwhile is still criticized by domestic researchers and media, that the growth ofChina's economy is too dependent on international trade. Although the governmentemphasizes that China should expand the domestic demand to improve the economicstructure, nobody can deny the importance of international trade to stabilize theeconomic growth. What's more, the global economic integration promotes theinternationalization of financial market. The2008financial crisis warns every country,considering the internationalization of financial market, every country will be affectedto a certain extent. The Chinese government has been actively exploring the reformplan and adapting to the wave to insure that our steady and robust economic growth.Under this circumstances, there is a lot of practical meaning to investigate the impactof financial development on export, the effect of credit constrain on firm export.The paper first summarizes related literatures in the view of financialdevelopment, credit constrain and heterogeneous firm. In the framework ofheterogeneous firm trade model, the paper mainly reviews two models. One is fromview of imperfect contract, represented by Chaney (2005) and Manova (2008). Theother is from view of incomplete information, represented by Feenstra et al?(2013).What's more, the paper also summarizes related empirical papers.In my opinion, most of the relevant paper is from the view of exchange ratevolatility to test the effect of financial internationalization on export. Meanwhile, dueto the scarcity of the data, mostly the variables denote credit constrain are cash flow orleverage, and the variables denote financial development is loans and deposits, which are obviously too endogenous. Based on the two points, in my paper, I firstly estimatethe effect of foreign bank entry to export. Meanwhile I agree that foreign bank entry isan exogenous shock to micro individual.In view of industry and firm, this paper estimates the effect of foreign bank entryand foreign bank scale on industrial export, firm export decision, firm export intensity.What's more, the paper analysis the effect to different ownership firm. The mainconclusions are as follows:(1) The paper provides evidence that foreign bank entry significantly improvesthe export of every sector within provinces. The effect is stronger for the sectors withmore serious financial vulnerability. What's more, the effect of the expansion offoreign banks is similar. The paper shows the robustness of the results by varioussamples, different financial vulnerability indexes and several econometrics methods.(2) The paper provides evidence that foreign bank entry significantly improvesthe possibility of a firm being exporter and firm export intensity. The effect is strongerfor firms in the sectors with more serious financial vulnerability.What's more, the paper examines the effect in accordance of ownership. Forprivate firm, HongKong and Macao firm and foreign invested firm, foreign bank entrysignificantly improves the possibility of a firm being exporter. On the contrary, forstate owned firm and collective owned firm, the effect is not significant.The expansion of foreign bank scale has similar effect.(3) To figure out the research question more deeply, I originally merge theCSMAR dataset with the manufacturing firm dataset. I found that to loan from localbank is the first choice of most firms. The number of foreign bank loan is not so much,but the total amount of foreign bank loan is much. By serious econometrics analysis, Ifound that with the increase of rate of foreign bank loan, the export intensity impoves.(4) Based on the analysis, at last the paper put forward some political suggestions,including financial market reform, eliminating the credit discrimination of ownership,and so on.The paper contributes to the literature from the following aspects:(1) The paper originally from the views of main entity of financial markets,foreign bank entry, estimates the financial internationalization on export. Most research about China is just in view of exchange rate. The diversity of this researchtopic is increased.(2) Meanwhile, due to the scarcity of the data, mostly the variables denote creditconstrain are cash flow or leverage, and the variables denote financial development isloans and deposits, which are obviously too endogenous. Based on the two points, inmy paper, I firstly estimate the effect of foreign bank entry to export. Meanwhile Iagree that foreign bank entry is an exogenous shock to micro individual. What's more,the paper examines the effect in accordance of ownership.(3) In this paper, I originally merge the CSMAR dataset with the manufacturingfirm dataset. Then I get specific information of firm loans. Based on this data, theinformation of foreign bank entry is granular down to firm level, and I estimate theeffect of foreign bank loan on firm export.