Credit rationing and firm exports: Microeconomic evidence from small and medium-sized enterprises in China

This paper examines the effect of credit rationing on export performance by small and medium-sized firms in China. We use a detailed firm-level data provided by the Small and Medium-sized Enterprises Dynamic Survey (SMEDS) during 2015-16 to conduct this analysis. The SMEDS provides firm-specific measures of credit rationing based directly on firm-level responses to the survey rather than indirect ones, based on firm-level financial statements. We find that, at the extensive margin, weak and strong credit rationing reduces export probability of small and medium-sized enterprises (SMEs) by 15.1% and 39.6%, respectively. At the intensive margin, they decrease SMEs' export values by more than 20.0% and over 28.8%, respectively. Different than existing literature, we construct valid firm-level instruments, firm-level housing stock, for credit rationing rather than using province-level instruments. We also employ county-industry-level instruments and obtain consistent estimates. In addition, credit rationing exhibits heterogeneous impacts on firms with different liquidity ratios, product portfolios, external collateral and capital utilisation rates.