Credit Allocation under Economic Stimulus: Evidence from China

Lin William Cong, Haoyu Gao, Jacopo Ponticelli*, Xiaoguang Yang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

128 Scopus citations


We study credit allocation across firms and its real effects during China's economic stimulus plan of 2009-2010. We match confidential loan-level data from the nineteen largest Chinese banks with firm-level data on manufacturing firms. We document that the stimulus-driven credit expansion disproportionately favored state-owned firms and firms with a lower average product of capital, reversing the process of capital reallocation toward private firms that characterized China's high growth before 2008. We argue that implicit government guarantees for state-connected firms become more prominent during recessions and can explain this reversal. Received August 23, 2017; editorial decision November 15, 2018 by Editor Philip Strahan.

Original languageEnglish (US)
Pages (from-to)3412-3460
Number of pages49
JournalReview of Financial Studies
Issue number9
StatePublished - Sep 1 2019

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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