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This research investigates how government loan guarantees influence the credit access and performance of SMEs in China.

June 30, 2026

The impact of government loan guarantees on SMEs’ credit access and performance: Evidence from China

Key Points

This research investigates how government loan guarantees influence the credit access and performance of SMEs in China.
Utilized a difference-in-differences approach to analyze data
Focused on small and medium-sized enterprises in China
Examined effects on long-term and short-term loans, along with profitability and R&D investment
GLGs significantly improve SMEs' access to long-term credit, without a significant impact on short-term loans.
Implementation of GLGs is associated with a decrease in profitability and R&D investment for SMEs.
These negative effects are more pronounced for SMEs with severe financing constraints and in the private sector.

Abstract

This paper examines the impact of government loan guarantees (GLGs) on the credit access and performance of small and medium-sized enterprises (SMEs) in China. Utilising a difference-in-differences approach, we find that GLGs significantly bolster SMEs’ access to credit by augmenting their long-term loans, whereas their effect on short-term loans is not significant. However, the implementation of GLGs leads to a decrease in SMEs’ profitability and research and development investment. These effects are particularly pronounced for SMEs experiencing severe financing constraints and for those in the private sector.

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