Does ownership matter in access to bank credit in China?

Employing two World Bank survey datasets of small- and medium-sized enterprises (SMEs), we investigate whether ownership discrimination exists in Chinese banks' credit allocation. By comparing firms' credit demand and loan availability, we identify two types of credit-rationing, self- and bank-rationing. We find that more than half of potential borrowers are credit-rationed, most of which is due to self-rationing. While several firm characteristics and macro-financial factors are important in determining chances of credit-rationing, there is no evidence to support the popular assertion of ownership discrimination in credit allocation in China. This also suggests that ownership reform alone is not sufficient for alleviating SMEs' funding difficulties.