Financial Development,financial Constrains And The Margins Of Trade In China

Enterprises need a lot of money to pay for export to cover fixed costs,so having access to external finance resources plays a key role in deciding the margins of trade.When the enterprise itself does not have enough funds and does not have access to the external financing,then it has to put off or even cancel the original export plan.As the developing country,China’s financial development lags far behind.Therefore,it can’t meet the need of money and corporate financing difficulty has become a common phenomenon.Based on the reality in our country,the development of financial department can effectively allocate the capital and support economic development,and more importantly,can alleviate the financing constraints of enterprises to promote export growth.Raising the ability to financing funds from the financial markets,for a potential exporter,it can help shorten the time of the enterprises entering the foreign market and improve the possibility of enterprise’s participation in international trade;for the incumbent exporters,it can bring down the financing cost and then help increase the export sales.So financial development can increase one country’s exports in the intensive margin and especially in extensive margin.In view of this,using the firm-level data in the year from 1998 to 2007,which is from the Chinese manufacturing enterprises database,this paper examines the direct impact on the enterprises’ export from the country’s financial development status and enterprise’s financial constraints and studies the interaction of financing constraints and financial development,analyzing how financial development indirectly effect the export growth through the channel of enterprise financing constraints.Our main results show: first,in the intensive margin of trade,financial structure plays the role in directly promoting enterprises’ export growth and financial scale does not have significant influence;in the extensive margin of trade,financial structure and financial scale both may improve enterprises’ export growth.Second,the development of financial scale can’t influence the margins of trade through alleviating corporate financial constraints.On the contrary,the excessive growth of financial scale may even decrease the growth of export.However,the optimization of financial structure can effectively alleviate corporate financing constraints and improve the margins of trade.This means that if the development of financial market only by expanding financial scale can’t reduce the impact of financial constraints on the margins of trade.The optimization of financial structure can reduce the impact.The financial structure reveals the true nature of financial development.Therefore,steadily pushing forward financial reform in our country especially by improving the financial structure may contribute to the margins of trade in the firm-level.Finally,in view of the direction of financial reform in our country this paper puts forward three suggestions: first,in the process of promoting China’s financial reform,to be more emphasis on the improvement of financial structure;Secondly,support the development of small and medium-sized financial institutions and establish a financial structure that meet the financing needs of small and medium-sized enterprise;In addition,encourage fair competition among financial institutions to reduce the financing cost.