This paper investigates the effects of monetary policy on corporate investment and the mitigating role of cash holding in China, using 13,766 firm-year observations from 2003 to 2013. The study finds that tightening monetary policy reduces corporate investment, but cash holdings mitigate these adverse effects. The mitigating role of cash is particularly significant for financially constrained firms, non-state-owned enterprises (non-SOEs), and firms in less developed financial markets. Cash holding also improves investment efficiency when monetary policy is tightening, and tightening monetary policy enhances the 'cash-cash flow' sensitivity. The empirical evidence suggests that monetary policies implemented in China are less effective for state-owned enterprises (SOEs). Therefore, there is a need for local governments to further develop regional financial markets to protect vulnerable businesses, such as non-SOEs and financially constrained firms, from external shocks to maintain their sustainable growth and competitive advantages. Key words: monetary policy; cash holding; corporate investment; financial constraints. JEL classification: E52 D92 M21. The authors thank the co-editor Prof. Zheng (Michael) Song and an anonymous reviewer for their insightful comments. Xingquan Yang acknowledges the financial support from the National Natural Science Foundation of China (No. 71362004). Liang Han thanks for the financial support from the Key Research Center of Humanities and Social Sciences in the general Colleges and Universities of Xinjiang Uygur Autonomous Region (XJEDU020114C01). Xingqiang Yin thanks for the financial support from the Xinjiang Autonomous Region Graduate Student Research Innovation Project (No. XJGRI2015046). Lin Tian thanks for the financial support from the Chinese Scholarship Council of the Ministry of Education (No. 201408060001).This paper investigates the effects of monetary policy on corporate investment and the mitigating role of cash holding in China, using 13,766 firm-year observations from 2003 to 2013. The study finds that tightening monetary policy reduces corporate investment, but cash holdings mitigate these adverse effects. The mitigating role of cash is particularly significant for financially constrained firms, non-state-owned enterprises (non-SOEs), and firms in less developed financial markets. Cash holding also improves investment efficiency when monetary policy is tightening, and tightening monetary policy enhances the 'cash-cash flow' sensitivity. The empirical evidence suggests that monetary policies implemented in China are less effective for state-owned enterprises (SOEs). Therefore, there is a need for local governments to further develop regional financial markets to protect vulnerable businesses, such as non-SOEs and financially constrained firms, from external shocks to maintain their sustainable growth and competitive advantages. Key words: monetary policy; cash holding; corporate investment; financial constraints. JEL classification: E52 D92 M21. The authors thank the co-editor Prof. Zheng (Michael) Song and an anonymous reviewer for their insightful comments. Xingquan Yang acknowledges the financial support from the National Natural Science Foundation of China (No. 71362004). Liang Han thanks for the financial support from the Key Research Center of Humanities and Social Sciences in the general Colleges and Universities of Xinjiang Uygur Autonomous Region (XJEDU020114C01). Xingqiang Yin thanks for the financial support from the Xinjiang Autonomous Region Graduate Student Research Innovation Project (No. XJGRI2015046). Lin Tian thanks for the financial support from the Chinese Scholarship Council of the Ministry of Education (No. 201408060001).