RESEARCH AND ANALYSIS: WORKING PAPERS
Trade Finance and Exports: Firm-level Evidence from China
We use panel data for listed firms from China for 2013-2021 to examine the association between their export earnings and trade finance, particularly those receiving trade loans. Results show that a percent increase in trade finance loan is associated with 0.067-0.083 percent increase in export earnings depending on the model.
When we proxy trade finance by the sum of trade finance loans and export-adjusted notes receivable, elasticity estimates range between 0.18-0.31 depending on the sample of exporters. These estimates are comparable to single and multi-instrument trade finance instrument elasticities in the literature. Elasticity of export earnings is higher for smaller firms that may have relatively limited financing options from domestic capital markets. Given that listed firms represent the largest companies, we acknowledge that study findings may not be generalizable to the universe of highly heterogeneous Chinese traders. Nonetheless, our results suggest that well-functioning markets for trade finance are likely to enhance trade, while, by contrast, lack of affordable trade finance can be a barrier to trade, or a trade cost, in its own right.
Staff Working Paper: Research ERSD-2024-05
Authors: Jiancong Liu, Marc Auboin, Beliyou Haile, Yu Wang
Manuscript date: 31 July 2024
Key Words:
Trade, empirical studies on trade, trade finance
JEL classification numbers:
F10, G21, O16, F14, F19
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This is a working paper, and hence it represents research in progress. The opinions expressed in this paper are those of the authors. They do not represent the positions or opinions of the WTO or its Members and are without prejudice to Members' rights and obligations under the WTO. Any errors are attributable to the authors.
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