Abstract
We examine empirically whether financial reform in China since 1994 has reduced the lending
bias that operated in favor of state-owned enterprises (SOEs) and against non-state-owned
enterprises such as collective-owned township and village enterprises (COTVEs), in the
manufacturing sector in Wuxi City, Jiangsu province. The reforms did not reduce the lending bias,
though they probably improved the efficiency of allocation of funds within COTVEs. Liquidity
constraints faced by enterprises affiliated to a business group in Wuxi City were not reduced, but after
1994 collateralizable assets became particularly effective in giving COTVEs better access to external
finance.
