The Impact of Trade Credit on Global Value Chain Position: Evidence from Chinese Manufacturing Firms

Conventional wisdom argues that a well functioning financial system is essential to foster economic growth and development. While its financial market is still underdeveloped, China has not only achieved great economic growth and speedy export growth, but also elevated its position as an exporter in the global value chain (GVC). This paper examines the impact of trade credit on the GVC positions of Chinese manufacturing enterprises. The empirical study finds that trade credit has a significant promotional effect on enterprises' GVC positions, and the effect is more pronounced for private firms, firms with high market position, and firms in high-technology industries. The mechanism analysis shows that trade credit heightens the export quality of products and alleviates the financing constraints of enterprises, thus promoting their GVC positions. The findings have implications for Chinese manufacturing firms to exploit the role of trade credit in promoting their GVC positions and fostering new advantages in international competition.