Central bank digital currency and corporate trade credit financing: evidence from China’s e-CNY pilot

This study examines how China’s digital yuan (e-CNY), an important practice of central bank digital currency (CBDC), affects firms’ reliance on trade credit financing within supply chains. Exploiting the staggered rollout of the e-CNY pilot and Chinese firm-level data from 2010 to 2024, we find that exposure to the e-CNY pilot significantly reduces firms’ reliance on trade credit financing, with trade credit financing as a share of total assets declining by 0.8% points, equivalent to approximately 5.6% of the sample mean. This result is supported by dynamic effect tests and remains stable across a range of robustness checks. Mechanism analyses show that the decline is associated with stronger internal profitability and relaxed external credit constraints. The cross-sectional results show that the decline is concentrated among firms with lower financing capability, firms with higher supply chain efficiency, firms in non-high-tech industries, in regions with lower digital financial inclusion, and in regions with stronger financial regulation. Additional tests further show that the e-CNY pilot reduces both supplier-side trade credit and financing obtained through customer advances, suggesting that the baseline effect is primarily driven by a reduced reliance on trade credit as a substitute for formal bank lending.