Market Structure, Welfare, and Banking Reform in China

52 Pages Posted: 3 Nov 2009

See all articles by Chun-Yu Ho

Chun-Yu Ho

State University of New York (SUNY) - Department of Economics

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Date Written: October 21, 2009

Abstract

This paper examines the effects of market deregulation on consumers and state commercial banks in China, a large developing country. I jointly estimate a system of differentiated product demand and pricing equations under alternative market structures. While China's banking reforms overall have achieved mixed results, the consumer surplus of the deposit market has increased. The welfare effects from reforms are unevenly distributed, with losses skewed toward inland provinces and certain consumer groups. There is no clear evidence that the pricing of banking services has become more competitive after the reform, and such pricing remains subject to government intervention. Encouragingly, the price-cost margins of some state commercial banks have fallen over time.

Keywords: banking reform, banks in China, demand estimation, market structure

JEL Classification: G21, L11

Suggested Citation

Ho, Chun-Yu, Market Structure, Welfare, and Banking Reform in China (October 21, 2009). BOFIT Discussion Paper No. 19/2009, Available at SSRN: https://ssrn.com/abstract=1492089 or http://dx.doi.org/10.2139/ssrn.1492089

Chun-Yu Ho (Contact Author)

State University of New York (SUNY) - Department of Economics ( email )

1400 Washington Ave
Albany, NY 12222
United States

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