Social Sciences in China (Chinese Edition)

No. 2, 2026

The Underlying Logic of Finance Serving the Real Economy: A New Collateral-Based Perspective

(Abstract)

Liang Qi, Shi Ning and Chen Wenzhe

Effective financial support for the real economy constitutes an important theme in boosting China’s strength in finance. However, the economic mechanism by which finance serves the real economy has long been inadequately clarified in theoretical terms. As a core dimension of financial contracts, collateral provides an appropriate theoretical perspective for understanding this issue. Through constructing an analytical framework and a theoretical model incorporating heterogeneous collateral, this study finds that the matching between collateral and assets can overcome financial frictions and reduce financial vulnerability, which is the inherent logic of financial support for the real economy. Empirical analysis reveals a typical characteristic of heavy reliance on general collateral and a scarcity of specific collateral in China. This not only constrains corporate financing but also exacerbates investment and financial volatility. To address these issues, it is essential to advance legal and market-oriented reforms, accelerate the cultivation and supply of specific collateral. Additionally, financial regulation should be cemented to curb the overuse of general collateral, thereby strengthening the foundation for finance to serve the real economy.