The opening of high-speed rail (HSR) has significantly boosted business development in China. This study constructs a credit rationing model based on the theory of information asymmetry, and takes the opening of HSR as a quasi-natural experiment to empirically examine its impact on the investment and financing decisions among firms with different risk profiles using data from A-share listed companies from 2005 to 2019. The findings reveal that HSR opening significantly reduces corporate short-term loans while increasing long-term loans, without affecting loan costs. Lowriskfirms, as opposed to high-risk ones, experience notable reductions in short-term loan amounts and extended loan terms post-HSR opening. This is attributed to HSR mitigating information asymmetry between banks and firms. Additionally, HSR opening suppresses "short-term debt for long-term use" behaviors, thereby enhancing investment efficiency and quality. The study empirically supports the idea of leveraging HSR's economic stimulus in terms of firm investment and financing.

Using a proprietary loan data set, we study how a large state-owned bank uses its internal ratings in loan granting decisions around China’s 2008 economic stimulus programme that relies on bank credit for financing. We find that there is little change in the rating process of the bank, and internal ratings remain a valid, albeit weaker, predictor of loan interest rates in the stimulus period. Weakened rating-interest rate relation is concentrated for borrowers from the industries that the stimulus programme focuses on, for state-owned enterprises (SOEs), for bank branches operating in provinces with a low level of credit market marketization, or when the credit rater and loan officer have no collaboration before. We also find that interest rates remain a valid predictor of ex-post loan outcomes in the stimulus period. Overall, there is no evidence that loan decisions of the state-owned bank are severely compromised in the economic stimulus period as speculated by some media. By showing how a state-owned bank maneuvers between supporting government stimulus initiative and maintaining market-based lending, we contribute to the limited literature on the roles of internal ratings in loan contracting decisions, and add to the debate over the roles of state-owned banks.

We study credit allocation across  rms and its real e ects during China's economic stimulus plan of 2009-2010. We match con dential loan-level data from the 19 largest Chinese banks with  rm-level data on manufacturing  rms. We document that the stimulus-driven credit expansion disproportionately favored state-owned rms and  rms with lower average product of capital, reversing the process of capital reallocation towards private  rms that characterized China's high growth before 2008. We argue that implicit government guarantees for state-connected  rms become more prominent during recessions and can explain this reversal.