The Impact Of Monetary Policy On Trade Credit In China

Trade credit is a short-term financing from upstream to downstream enterprises generated from commodity sales behavior,which is a form of social credit.Trade credit’s history is dating back to credit transactions on bazaars during the Qin Dynasty.With the social economy developed,trade credit increasingly becomes an important short-term financing instrument.Monetary policy is one of the most important means of macroeconomic regulation and control in China,which impacts micro enterprise’s behavior.Because system and capital market is not perfect,the monetary policy transmission in our country mainly rely credit channel.As the main financing source for enterprises,the tightness of the bank loan has an impact on enterprise’s behavior,thus affecting the output.When it’s difficult to obtain credit funds from the bank,the enterprise will get fund from their partner.So it is very important to study the interaction between trade credit and bank loan,which is focus scholars argued about.The micro level researches on trade credit mainly focus on why trade credit exists.Based on the special system of our country,this paper analyzes the financing motivation of the enterprise’s trade credit from the angle of using the trade credit.There are two main aspects: first,the market power;second,the nature of property rights.Enterprises with different market power and property rights have a certain difference in the use of trade credit,which is also determined by the characteristics of the enterprise itself.Of course,the imperfect market environment of our country is also an influencing factor.From the macro level,the research mainly focuses on the relationship between trade credit and macroeconomic,that is,the impact of monetary policy on trade credit.Monetary policy indirectly affects the trade credit of enterprises through bank loan.Based on previous scholar’s theory,this paper finds the substitution relationship between trade credit and bank loan and introduces monetary policy,a macroeconomic policy,to the research of the interactive relationship.We try to study the impact of monetary policy on our country’s trade credit.At the same time,the tightness of monetary policy has different effects on the use of trade credit of enterprises with different characteristics,especially from two aspects of market power,state-owned enterprises or non-state-owned enterprises.Based on the discussion above,this article will explore the following three questions: first,whether there exists substitutability relations between trade credit and bank loan;second,the difference in the use of trade credit between stronger market power and weaker market power,state-owned enterprises or non-state-owned enterprises;third,the effect of the tightness of monetary policy on the above two conclusions.Therefore using the method of both theory and empirical analysis,on the basis of theoretical analysis,we select the 2004-2014 annual data of China A-share manufacturing listing Corporation as the sample,construct the multiple regression model.Empirical results show that there is a significant substitution relationship between trade credit and bank loan,and the substitution effect is more obvious in the period of monetary policy tightening,indicating that monetary policy has certain influence on trade credit.In addition,compared with the state-owned enterprises,non-state-owned enterprises rely more on trade credit financing and is more obvious in the period of monetary policy tightening,indicating that China’s credit discrimination phenomenon is significant;Enterprises with stronger market power get more trade credit financing than those with lower market power,especially in the period of the tightening of monetary policy,reflects the dilemma of difficult financing of small and medium-sized enterprise in our country.Finally,this paper summarizes the relevant recommendations,and points out the deficiencies of this paper and the follow-up research direction.