Competition and Profitability in the Chinese Banking Industry

New Evidence from Different Ownership Types

Research output: Contribution to journalArticle

Abstract

This paper tests the competition in different banking markets in China (deposit, loan, and non-interest income markets) using a sample of Chinese commercial banks (state-owned, joint-stock, and city commercial banks) over the period 2003–2013 and further examines the impact of competition on bank profitability for the whole sample and also for different ownership types. The results show that non-interest income market in the Chinese banking industry has a higher level of competition compared to the other two markets during the early years of the examined period. The findings further report that in a higher competitive deposit market, Chinese commercial banks have lower levels of profitability. Finally, the results suggest that a higher competitive loan market leads to higher profitability of all these three types of banks while the impact of deposit market competition is significant and negative.

Original languageEnglish
Number of pages24
JournalJournal of Industry, Competition and Trade
Early online date29 Apr 2019
DOIs
Publication statusE-pub ahead of print - 29 Apr 2019

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Ownership
Profitability
Banking industry
Commercial banks
Deposits
Non-interest income
Loans
Bank profitability
Banking
Chinese market
China
Market competition

Cite this

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title = "Competition and Profitability in the Chinese Banking Industry: New Evidence from Different Ownership Types",
abstract = "This paper tests the competition in different banking markets in China (deposit, loan, and non-interest income markets) using a sample of Chinese commercial banks (state-owned, joint-stock, and city commercial banks) over the period 2003–2013 and further examines the impact of competition on bank profitability for the whole sample and also for different ownership types. The results show that non-interest income market in the Chinese banking industry has a higher level of competition compared to the other two markets during the early years of the examined period. The findings further report that in a higher competitive deposit market, Chinese commercial banks have lower levels of profitability. Finally, the results suggest that a higher competitive loan market leads to higher profitability of all these three types of banks while the impact of deposit market competition is significant and negative.",
keywords = "Bank profitability, Bank competition, GMM, China",
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AB - This paper tests the competition in different banking markets in China (deposit, loan, and non-interest income markets) using a sample of Chinese commercial banks (state-owned, joint-stock, and city commercial banks) over the period 2003–2013 and further examines the impact of competition on bank profitability for the whole sample and also for different ownership types. The results show that non-interest income market in the Chinese banking industry has a higher level of competition compared to the other two markets during the early years of the examined period. The findings further report that in a higher competitive deposit market, Chinese commercial banks have lower levels of profitability. Finally, the results suggest that a higher competitive loan market leads to higher profitability of all these three types of banks while the impact of deposit market competition is significant and negative.

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