Chinese import competition and the provisions for external debt financing in the US

• 成果类型: Article
• 署名作者: Rahaman, Mohammad M.
• 署名单位: Saint Marys University - Canada
• 刊物名称: JOURNAL OF INTERNATIONAL BUSINESS STUDIES
• ISSN/ISSBN: 0047-2506
• DOI: 10.1057/s41267-016-0007-2
• 发表日期: 2016
• 页码: 898-928
• 关键词: globalization; import competition; cost of capital; CHINA

摘要

How does international competition originating from low-wage countries affect domestic financing capacity of firms in high-wage countries? In this article, we use China's entry into the World Trade Organization (WTO) as a quasi-natural experiment to investigate the effects of trade-induced competition originating from China on the price and design of bank-loan contracts for firms in US manufacturing industries. We find that the elevated level of Chinese import competition in the US, following China's WTO entry, is associated with a reduction in the overall cost of bank financing for import-competing US manufacturing firms, evidenced by lower spread, higher amount, longer maturity, and less restrictive non-price contract terms such as collateral and covenants. We show that such reduction in the external financing premiums of import-competing firms is the result of trade-induced productivity gains within firms and a reallocation of financing between firms towards more capital-intensive and technologically advanced firms. These results suggest that engaging in international business activities with a low-wage country via trade openness is likely to ease the provisions of external debt financing for firms in high-wage countries.