Competition or privatization: which is more effective in China’s banking sector reform?

Abstract

Using provincial panel data for Chinese commercial banks in the period 2002–2007, this article investigates the impact of competition and privatization on bank lending efficiency. We find evidence of noncommercialization in lending activities. In comparison with privatization, competition plays a more important role in improving lending efficiency.

Keywords:

• China
• competition
• privatization
• reform

JEL Classification:

• P34
• P31

Notes

¹ The four largest stated-owned commercial banks are the Industrial and Commercial Bank of China (ICBC), the China Construction Bank (CCB), the Agricultural Bank of China (ABC) and the Bank of China (BOC).

² We also used the Herfindahl–Hirschman Index (HHI) as a robustness check and obtained qualitatively similar results.

³ Tibet is excluded due to missing data in the original sources.