The Impact Of Financial Constraints On Export Decisions In China

Financial constraints are common problems the enterprises faced in developing countries.Facing the complex international market environment, exporters will face more serious financial constraints.Based on the Trade Models With Heterogeneous Firms,this paper will consider the relationships between financial constraints and firms’ ability to enter export market.Firms’ financial constraints will be measured under three dimensions--the internal cashflow.bank loan and commercial credit.Our data include more than460000manufacturing firms over the period2003-2007.The results show that:(1) There is " paradox under financial constraints " among exporters in China.Firms which have better financial conditions donnot take the initiative to export,while firms under severe financial constraints will export.There’s adverse selection behavior between financing and export.(2) There is "learning by exporting" effect among exporters in China.Participation in export markets can improve enterprise’s financial condition, and alleviate the pressure of shortage of funds.(3) Financial conditions affect trade values.The phenomenon of exporting for financial support reflects the imperfections in China’s capital markets.and the strong export incentives of SMEs reflect that exporting market structure is unreasonable, the findings have important policy implications as it suggest that.Firstly,in presence of financial markets imperfections, accelerating the pace of financial deepening,developing multi-level capital market and improving firms’financial environment will be key solutions to solve these problems.Secondly,considering the characteristics of SMEs,their financial mechanism should be improved in order to promote their development.Finally, the behavior of exporters should be guided reasonably.