Government credit and trade war

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Title: Government credit and trade war
ISBN: 978-952-323-270-9
Author: Cai, Ning ; Feng, Jinlu ; Liu, Yong ; Ru, Hong ; Yang, Endong
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
ISSN: 1456-5889
Series year: 2019
Series number: 7/2019
Year of publication: 2019
Publication date: 23.4.2019
Pages: 47
Subject (yso): vienti; ulkomaankauppa; yritykset
Keywords: Bofit-kokoelma; kauppasota; Kiina; Yhdysvallat
JEL: E51; F30; G21; G28
Other keywords: government credit; export; supply chain; trade war
Abstract: By merging transaction-level trade data from China Customs and loan data from the China Development Bank (CDB), we analyze the effects of government credit on trade activities. We find that CDB credit mainly flows to SOEs in strategic industries at the top of the supply chain. These up-stream loans lead to the lower price and higher amount of export goods of private firms in down-stream industries, which leads to decreases in employment and performance of the US firms in the same industry. In contrast, the US firms in downstream industries use cheaper intermediate goods imported from China and perform better subsequently.
Table of contents: Abstract..4 I Introduction..5 II Institution background..9 III Data, variables, and summary statistics..11 A China customs data and Chinese industry census data..11 B CDB loan data and politician profile data..12 C Data on US firms..14 D Summary statistics..14 IV Empirical analyses and results..16 A CDB loans and export..16 B Causal effects of CDB loans on exports..19 C Impact on US firms..25 V Conclusion..31 References..32 Appendix..35

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