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

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.