Our study documents several interesting findings. First, we use a more refined data set with quarterly data with Chinese firms to examine the relation between trade credit and bank loans in developing country. Bank loans and trade credit (accounts payable and accounts receivable) are found to be negatively and positively related. Increased bank loan causes an increase in trade credit, implying a complementary effect between bank loan and accounts receivable. Decreased bank loan causes an increase in accounts payable, and it implies a substitute effect between bank loan and accounts payable.