SMEs’ line of credit under the COVID-19: evidence from China

Yun LIU, Yifei ZHANG*, Heyang FANG, Xin CHEN

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

11 Citations (Scopus)


How does the COVID-19 affect SMEs’ financing in emerging markets? In this paper, we investigate the impact of the COVID-induced shock on Chinese SMEs’ line of credit (LOC) using deal-level data. As Hubei province was mostly affected, we employ a difference-in-differences approach with the propensity score matching (PSM-DID) and compare Hubei SMEs’ credit responses before and after the outbreak relative to those of non-Hubei SMEs. Our results suggest that Hubei SMEs’ credit demand reduced significantly compared to that of non-Hubei SMEs, and the adverse effects were more pronounced for the non-state-owned enterprises (non-SOEs) and the SMEs without prior bank relationships. Moreover, we show a negative impact on non-Hubei SMEs having supply chain relationships with Hubei province. Such effects rippled through the supply chain and exerted an intensified strike on the SMEs with Hubei customers. Finally, we find the state-owned banks eased the LOC to Hubei SMEs during the pandemic outbreak.
Original languageEnglish
Pages (from-to)807–828
Number of pages22
JournalSmall Business Economics
Issue number2
Early online date26 Mar 2021
Publication statusPublished - Feb 2022
Externally publishedYes

Bibliographical note

Funding Information:
We would like to thank Roy Thurik (Guest Editor) and two anonymous referees for their insightful comments. We also thank Povilas Lastauskas and other participants for their excellent suggestions at the Virtual Paper Development Workshop ?Economic Effects of the COVID-19 2020 Pandemic on Entrepreneurship and Small Firms.? All errors are our own.

Publisher Copyright:
© 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC part of Springer Nature.


  • COVID-19
  • Chinese Economy
  • Line of Credit
  • SMEs


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