Can government policies enhance the trade credit financing advantages of private enterprises: a quasi-natural experiment of government support for private enterprise reform

Abstract

Ownership-based credit discrimination has long constrained private enterprise development in China, forcing an over-reliance on costly informal financing. This paper evaluates the 2019 Government Support Policy for Private Enterprises (GSPE), a comprehensive reform addressing market access, fair competition, and financing barriers. Using 47,389 firm-year observations of Chinese A-share listed firms from 2009 to 2024, this study finds that the GSPE significantly enhances the relative advantage of private enterprises over state-owned enterprises (SOEs) in accessing trade credit financing. Specifically, relative to SOEs, private enterprises experience a significant improvement in trade credit received and a significant decline in trade credit extended. The effect operates through three channels: improving the institutional environment, reducing information asymmetry, and expanding access to government subsidies. Moreover, this effect is more pronounced for private enterprises with weak market power, low customer concentration, and strong implicit government guarantees. The GSPE also generates economic benefits by reducing corporate risk, enhancing profitability, and improving market resource allocation efficiency, which provides empirical support for targeted private sector reforms.