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1 results

  • The China Syndrome Affects Banks: The Credit Supply Channel of Foreign Import Competition

  • Sergio Mayordomo, Omar Rachedi
  • Journal:
    Journal of Financial and Quantitative Analysis / Volume 57 / Issue 8 / December 2022
    Published online by Cambridge University Press:
    11 April 2022, pp. 3114-3144
    Print publication:
    December 2022

  • Did the rise of Chinese import competition in the early 2000s affect banks’ credit supply policies? Using bank-firm-level data on the universe of Spanish corporate loans, we find that banks rebalanced their loan portfolios away from firms facing Chinese import competition and toward profitable firms in nonexposed sectors. Banks supplied more credit also to the construction sector, albeit independently of firms’ profitability. This was not due to banks’ exposure to the housing boom. Rather, the geographical concentration of the manufacturing industries competing with China left local banks with few alternatives other than local construction firms to rebalance their loan portfolios.