Trade credit, traditional credit and monetary policy transmissions: Evidence from Chinese firms

This paper investigates the determinants and roles of trade credit (informal financing channel) and traditional credit (formal financing channel) based on a sample of 674 listed firms from the manufacturing sector in China during monetary policy transmissions over 2001-2007. Our evidence supports that trade credit likely plays a complementary role to traditional credit, and that the imperfect credit market view rather than the redistribution view accounts for the complementary hypothesis according to our sample.