The Influence Of Credit Constraints And Financal Development On Exit And Export Of Firms

Since the reform and opening,China's economy maintained a rapid growth.The average annual growth rate of GDP surpassed double digits in the period of 1980-2013.At the same time,China's foreign trade has made considerable development.In 2013,China's exports trade account for 11.7% of the world exports while the proportion of the United States whose total exports trade was in the second place in the world was only 8.4%.China has become a both manufacturing and trade power.Export growth is very important to stimulate economic growth,to solve the employment problem and to promote the transfer of labor population in urbanization.Although China has become the biggest exporter,a large number of empirical studies show that China's export product quality has not been improved significantly.As rising prices in labor force,energy and raw materials,the manufacturing industry of our country's low cost advantage becomes weak,and export growth is difficult to continue in international market by low cost and low price competing.We should carry out the transformation and upgrading of economic growth and enhancing products quality is the key.Meanwhile,as a developing country in transition,China's financial sector reform and development lags behind the product sector.The World Bank's report shows,in china,75% of the non-financial companies think credit constraints is the main obstacle to the development of enterprises,which reached the highest proportion in the 80 countries surveyed.This indicated that China's financing environment is one of the worst.As a result,studying the effects of credit constraints,financial development on the exit,export scale,extensive margins,intensive margins and products quality of China's manufacturing industry enterprises in such a background has a great practical significance.In theoretical,Melitz(2003)explains the relationship between productivity and firm export under the assumption that firms manufacture one product.Melitz argues the higher the productivity,the lower the marginal cost.So only those firms with productivity high enough can overcome export cost and enter the export market.Those firms with middle level productivity can only sale on domestic market.And the firms with the lowest productivity will exit the market.Since then trade theory entered a new era of New-New Trade Theory.However,Melitz's(2003)model has defects in at least the following three aspects:(1)single-product assumption.A mount of empirical literature shows multi-product dominated the export behavior of firms.(2)Productivity is the only heterogeneity assumption.For multi-product firms heterogeneity in product quality also plays an important role in export.(3)No credit constraints assumption.In fact,credit constraints are one of the key heterogeneities.Because,firms can't enter export market regardless of high productivity if there are credit constraints.Or firms may be forced to exit even though their productivity is not the lowest.Because of Melitz's(2003)model's defections,it can't explain all the enterprise behavior.This paper introduces the credit constraint factor into the existing theoretical model and explain exit and export behavior of firms under credit constraints.In empirical,this paper's main data source for the firm-level production data is the annual surveys of Chinese manufacturing firms,which was conducted by the National Bureau of Statistics of China(NBSC).The second database is the Chinese trade data from China's General Administration of Customs as well as the merging data of both databases.We analyze the influence of credit constraints and financal development on exit and export of firms with these data,the main findings are as follows:(1)the tighter the credit constraints,the higher the risk of exit.And the effects of credit constraints on firm exit risk are accelerated increasing.Financial development reduces the exit risk of high productivity firms,while increases the exit risk of low productivity firms.(2)firm-level credit constraints reduce the duration of export,as well as the export destination extensive margins.(3)Financial development increases gross volume of export,export destination extensive margins,export product extensive margins and export intensive margins while reduces export coverage.(4)There is a negative correlation between the quantity of export products and product quality.Financial development didn't upgrade the quality of products effectively.This paper's empirical research enhances the understanding of credit constraints' effects on firm export.And also provide a factual foundation for the formulation of trade policy.