The characteristics analysis of credit reallocation in China's corporate sector: From the volatility, spatiality, cyclicality and efficiency approach

Abstract

In this paper, taking the non-financial and non-real estate firms included in Chinese Industrial Enterprise Database from 2004 to 2014 as a sample, we study the characteristics of credit reallocation in the corporate sector. Firstly, based on credit reallocation indicators, we describe the volatility, spatiality, and cyclicality of credit reallocation in China's corporate sector, and find that the cyclicality satisfies one path of Schumpeter's conjecture. Secondly, we analyze the efficiency of China's credit reallocation, and find that it violates one path of Schumpeter's conjecture. The conclusions are: (i) The net change of credit aggregate masks the massive credit reallocation, credit destruction is more volatile than credit creation, and the trend of credit reallocation is similar to that of credit creation. (ii) China's credit reallocation is cross-provincial and intra-regional. (iii) China's credit reallocation is countercyclical. (iv) China's credit reallocation has a scale effect; however, it does not have a cleansing effect, and the economic downturn will make it even less cleansing effect.