Abstract
This paper investigates which forms of trade credit finance which corporate activities of non-state-owned enterprises in China, comparing coastal and interior areas. Using firm-level panel data for 1998–2007, we find: (1) trade credit in China supports investment by non-state owned-enterprises; (2) trade credit in the form of notes and accounts payable is more developed and actively used to finance investment in the coastal areas compared with the interior; and (3) the dominant and significant form of trade credit changes from deposits received to notes and accounts payable, likely driven by development of interfirm trust and increasing market competitiveness.
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