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Fintech at Alibaba: What automated firm credit reveals about the inefficiency of Chinese banking?

English title Fintech at Alibaba: What automated firm credit reveals about the inefficiency of Chinese banking?
Applicant Hau Harald
Number 176387
Funding scheme Project funding (Div. I-III)
Research institution Institut universitaire en finance - GFRI Université de Genève
Institution of higher education University of Geneva - GE
Main discipline Economics
Start/End 01.12.2017 - 31.01.2021
Approved amount 454'120.00
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Keywords (3)

FinTech; Regression Discontinuity Design; Microfin

Lay Summary (French)

Lead
Fintech at Alibaba:What automated firm credit reveals about the inefficiency of Chinese banking?Professor Dr. Harald HauProfessor Dr. Yi HuangHongzhe Shan, SFI PhD candidateYe Zhang, SFI PhD candidateProject Partner: Zixia Sheng (Ant Financial)
Lay summary

La plateforme de négociation en ligne Alibaba offre un crédit automatique pour plus de 3 millions de moyennes et petites entreprises en Chine. La gestion des allocations automatiques de crédit engendre des conséquences à différents niveaux basés sur le trafic du marché observé en ligne. Ces crédits à effet de seuil nous permettent d’explorer l’effet de causalité de l’accès au crédit des petites entreprises et leur croissance, ainsi qu’à l’effet variant selon les modalités des industries et des banques locales à travers la Chine.

Dans un deuxième temps, nous utiliserons les variations géographiques dans les offres de crédit à travers la Chine pour voir si le crédit de l’entreprise Alibaba est plus utile aux entreprises dans les régions où les crédits des banques traditionnelles sont plus difficiles à obtenir. Nos résultats contribueront à une meilleure compréhension du rôle de Fintech, afin de surmonter les contraintes des crédits des petites et moyennes entreprises et de comprendre de quelle façon les déficiences du système bancaire local pourraient être compensées par Fintech.

Direct link to Lay Summary Last update: 14.11.2017

Lay Summary (English)

Lead
Fintech at Alibaba:What automated firm credit reveals about the inefficiency of Chinese banking?Professor Dr. Harald HauProfessor Dr. Yi HuangHongzhe Shan, SFI PhD candidateYe Zhang, SFI PhD candidateProject Partner: Zixia Sheng (Ant Financial)
Lay summary

The online trading platform Alibaba provides automated credit for over three million small and medium size firms in China. Various threshold effects governing the automated allocation of credit based on the business traffic observed in the online market place. These credit threshold effects allow us to explore the causal effect of small firm credit access on firm growth and how this effect varies by industry and local banking conditions throughout China.

In a second step, we use geographic variation in credit supply across China to see if Alibaba firm credit is most useful to firms in those regions where traditional bank credit is hardest to obtain. Our findings contribute to a better understanding of the role of Fintech in overcoming credit constraints of small and medium size firms and how deficiencies in the local banking market can be compensated by Fintech.
Direct link to Lay Summary Last update: 14.11.2017

Responsible applicant and co-applicants

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Publications

Publication
“How FinTech Enters China’s Credit Market”
HaraldHau (2019), “How FinTech Enters China’s Credit Market”, in AEA P&P, 109, 60-64.

Scientific events

Active participation

Title Type of contribution Title of article or contribution Date Place Persons involved
NBER Chinese Economy Working Group Meeting Talk given at a conference Capital Scarcity and Industrial Decline: Evidence from 172 Real Estate Booms in China 26.09.2019 Boston, United States of America Hau Harald;


Abstract

The online trading platform Alibaba provides automated credit for over three million small and medium size firms in China. Various threshold effects governing the automated allocation of credit based on the business traffic observed in the online market place. These credit threshold effects allow us to apply a Regression Discontinuity Design (RDD) and explore the causal effect of small firm credit access on firm growth and how this effect varies by industry and local banking conditions throughout China.In a second step, we use geographic variation in credit supply across China to see if Alibaba firm credit is most useful to firms in those regions where traditional bank credit is hardest to obtain. Our findings contribute to a better understanding of the role of FinTech in overcoming credit constraints of small and medium size firms and how deficiencies in the local banking market can be compensated by Fintech.JEL classification: G14; G21; G23
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