Bank Profitability and GDP Growth in China: A Note

Yong Tan, Christos Floros

Research output: Contribution to journalArticle

33 Citations (Scopus)

Abstract

This article examines the effect of GDP growth on bank profitability in China over the period 2003-2009. The one-step system GMM estimator is used to test the persistence of profitability in the Chinese banking industry. The empirical findings suggest that cost efficiency is positively related to bank profitability, while lower profitability can also be explained by higher taxes paid by banks. In addition, there is a negative relationship between GDP growth and bank profitability. Furthermore, the results show that (1) the profitability in the Chinese banking industry is significantly affected by the level of non-performing loans, and (2) Chinese banks with higher levels of capital have lower profitability. Finally, we find that the departure from a perfectly competitive market structure in the Chinese banking industry is relatively small.

Original languageEnglish
Pages (from-to)267-273
Number of pages7
JournalJournal of Chinese Economic and Business Studies
Volume10
Issue number3
DOIs
Publication statusPublished - 2012
Externally publishedYes

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