Financing constraints and the export partnerships with RCEP: Evidence from manufacturing firms in China

Despite the continued growth of Chinese exports post the COVID-19 shock, concerns persist regarding trade relationship stability. Particularly within the Regional Comprehensive Economic Partnership (RCEP), a critical export partner for China, many firm-level partnerships exhibit short durations. Through survival analysis, we demonstrate the significant role of financing constraints in these unstable export partnerships with RCEP. Aligned with the pecking order theory of exports, financing constraints prompt firms to either reduce the number of export destinations or shift to larger economies as export partners, thereby destabilizing export partnerships with RCEP members. Moreover, our findings indicate that while traditional bank support benefits large firms in mitigating the adverse effects of financing constraints, small firms rely more on financial support from intermediaries and government subsidies. In addition to financial support, firms can maintain stable export partnerships with RCEP by diversifying export products.