This paper examines the impact of monetary policy on corporate investment in China, using 13,766 firm-year observations from 2003 to 2013. The study finds that tighter monetary policies reduce corporate investment, but cash holdings can mitigate these negative effects, particularly for financially constrained firms, non-state-owned enterprises (non-SOEs), and firms in less developed financial markets. Cash holding also enhances investment efficiency and increases the sensitivity of investment to cash flow when monetary policy is tight. The findings suggest that current monetary policies in China may be less effective for state-owned enterprises and highlight the need for local governments to develop regional financial markets to protect vulnerable businesses from external shocks, ensuring their sustainable growth and competitive advantages.This paper examines the impact of monetary policy on corporate investment in China, using 13,766 firm-year observations from 2003 to 2013. The study finds that tighter monetary policies reduce corporate investment, but cash holdings can mitigate these negative effects, particularly for financially constrained firms, non-state-owned enterprises (non-SOEs), and firms in less developed financial markets. Cash holding also enhances investment efficiency and increases the sensitivity of investment to cash flow when monetary policy is tight. The findings suggest that current monetary policies in China may be less effective for state-owned enterprises and highlight the need for local governments to develop regional financial markets to protect vulnerable businesses from external shocks, ensuring their sustainable growth and competitive advantages.