| China's 1978 "opening and reform" era prompted the country's gradual transformation from a destitute and unstable economy to one that sustained double-digit growth. Beginning in the 1990's, privatization efforts spun-off the healthiest state-owned enterprises. While this newfound freedom alleviated political pressures and enabled managers to make business-based decisions, it also created a capital deficit for small and medium-sized enterprises. Managers who once fulfilled policy directives from centrally disbursed funds now found themselves in need of capital to fuel enterprise growth. Concurrently, as a result of conditions for admittance to the World Trade Organization in 2001, China's Communist regime opened markets to foreign banks on a city-by-city basis in 2003.;This thesis examines cities with and without foreign banks to determine the impact on credit access for small and medium-sized enterprises. The analysis shows that while there is a mildly negative correlation between bank credit reliance and foreign bank presence, the variety of factors that influence a firm's capital structure obscure any significant relationship. |
