Social Sciences in China, 2025

Vol. 46, No. 3, 2025

Re-Lending Business of Non-Financial Firms in China

(Abstract)

He Qizhi, Zhang Chengsi and Zheng Ning

The existing literature has focused on examining the explicit financial investments of firms in different countries across the world. However, in this study, we broaden the scope to include the implicit financialization activities of non-financial firms, specifically their relending business. We develop a portfolio selection model to investigate the factors driving both explicit and implicit financialization activities, using quarterly data from Chinese A-share listed non-financial firms between 2007 and 2024. Our empirical findings demonstrate that risk aversion and profit-seeking play significant roles in driving the financialization activities of these firms. Sub-sample estimations further indicate that state-owned enterprises, manufacturing firms and firms in the eastern and northeastern regions are motivated by the profit-seeking motive when it comes to both financial investments and re-lending business, whereas non-state-owned enterprises, non-manufacturing firms and firms in the central and western regions are mainly driven by risk-aversion motives.

Keywords: financial investment, portfolio choice, re-lending business