Panel Analysis of Chinese Corporate Debt -- How Far Have Market Mechanisms Penetrated? --

In this paper, we investigate the impact of reforms in the banking sector and shifts of the monetary policy focus from quantitative controls to interest-rate controls on bank-lending and corporate-borrowing activities by applying a panel-data analysis of financial data of listed Chinese companies. Our three main conclusions on corporate borrowing are as follows: 1) quantitative controls on bank lending still remain through such mechanisms as 'window guidance', but their impacts are diminishing; 2) the effect of official lending rates is increasing; and 3) banks are placing more emphasis on financial indicators and corporate conditions when lending money to borrowing companies.