Competition in Chinese Commercial Banking

Abstract

This study assesses competitive conditions in the Chinese commercial banking industry during a period of major structural change. In particular, the Rosse-Panzar H-statistic is estimated for a panel of 76 banks over the period 1997-2006. The results show that banks in China operate under a system of monopolistic competition in general. The disaggregated analyses suggest that the intensity of competition in the core market for bank lending increased after China’s World Trade Organisation accession and alongside interest rate liberalisation. However, it seems that competition has become less intense in the non-core (off-balance-sheet) market for Chinese banks.

Keywords: Competitive conditions, Chinese banking

JEL Classification: G21, L1, D40