Financial Support and Growth of Township and Village Enterprises in China: Fresh Evidence From Regional Analyses

Abstract

This article aims to investigate the impact of financial support on output of township and village enterprises (TVEs) during 2007 to 2013. We use panel data of 28 provinces of China to study the heterogeneous effects of financial support on output of TVEs by introducing control variables and financial support variables of interaction terms and panel threshold model. This article uses the counterfactual measurement method to measure the actual contribution of financial support toward the output of TVEs. The results show that there is an inverted-U relationship between financial support and output of TVEs. Foreign capital participation and economic development enhance the driving effect of financial support, whereas, export intensity, fiscal support, and expansion of enterprise scale reduce the financial support effect. Regional analyses indicate that financial support in the central region of China has a significant positive effect; however, the effect of financial support is not significant in the western region. Furthermore, the contribution of financial support to the total output is 16% to 18% in the eastern region, and 14% to 16% in the central region.