The authors examine how stronger creditor protection in finance lease helps mitigate financial frictions. Utilizing transaction-level data from Chinese listed firms, they uncover several unique findings: (1) lessees (borrowers) tend to be more efficient but face greater financial constraints, while lessors (lenders) are less efficient but experience fewer financial constraints; (2) state-owned enterprises (SOEs) are more likely to act as lessors, whereas private-owned enterprises (POEs) are more likely to be lessees; (3) finance leases enable lessors to generate profits and help lessees alleviate financial frictions. A general equilibrium model with heterogeneous firms captures these empirical findings. Calibrating the model to the Chinese economy, they show that the finance lease market increases total factor productivity (TFP) by 12.71%. This improvement results from reducing both general financial frictions faced by individual firms and distortions associated with state ownership. They find that the latter effect dominates, accounting for 80% of the total TFP gain.