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Efficiency Amongst China’s Banks:A DEA Analysis Five Years after WTO Entry

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WTO entry in 2001 heralded a new stage in the reform of China’s banking sector. With the reality that foreign banks would be extended national treatment by the end of 2006, China’s banks faced the imperative to reform in earnest. They began reforms from a variety of different starting points and have pursued a variety of different reform approaches. Five years on, this paper assesses efficiency levels in 11 of China’s most prominent banks. The results, obtained using Data Envelopment Analysis (DEA), suggest that differences in efficiency levels are actually quite small. On the one hand, this finding is encouraging because it suggests that few of China’s major banks lag behind the pack. On the other hand, it also implies that efficiency levels almost certainly do lag in China’s less prominent banks, which together still account for more than 40 per cent of total banking system assets.

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File URL: http://www.uq.edu.au/economics/eaerg/dp/EAERG_DP16.pdf
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Paper provided by School of Economics, University of Queensland, Australia in its series EAERG Discussion Paper Series with number 1605.

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Handle: RePEc:qld:uqeaer:16

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  1. Lamin Leigh & Richard Podpiera, 2006. "The Rise of Foreign Investment in China's Banks," IMF Working Papers 06/292, International Monetary Fund.
  2. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
  3. Ma, Guonan & Fung, Ben S. C., 2006. "Using asset management companies to resolve non-performing loans in China," Journal of Financial Transformation, Capco Institute, vol. 18, pages 161-169.
  4. Leung, M.K. & Chan, Ricky Y.K., 2006. "Are foreign banks sure winners in post-WTO China?," Business Horizons, Elsevier, vol. 49(3), pages 221-234.
  5. John P. Bonin & Yiping Huang, 2002. "Foreign Entry into Chinese Banking: Does WTO Membership Threaten Domestic Banks?," The World Economy, Wiley Blackwell, vol. 25(8), pages 1077-1093, 08.
  6. Cj O'Donnell & G Westhuizen, 2002. "Regional Comparisons of Banking Performance in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 70(3), pages 224-240, 03.
  7. James Laurenceson & Fengming Qin, 2008. "Has Minority Foreign Investment in China's Banks Improved Their Cost Efficiency?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(3), pages 57-74.
  8. Guonan Ma, 2007. "Who Pays China's Bank Restructuring Bill?," Asian Economic Papers, MIT Press, vol. 6(1), pages 46-71, February.
  9. Fu, Xiaoqing (Maggie) & Heffernan, Shelagh, 2007. "Cost X-efficiency in China's banking sector," China Economic Review, Elsevier, vol. 18(1), pages 35-53.
  10. David A. Grigorian & Vlad Manole, 2002. "Determinants of Commercial Bank Performance in Transition," IMF Working Papers 02/146, International Monetary Fund.
  11. Chen, Xiaogang & Skully, Michael & Brown, Kym, 2005. "Banking efficiency in China: Application of DEA to pre- and post-deregulation eras: 1993-2000," China Economic Review, Elsevier, vol. 16(3), pages 229-245.
  12. Subal Kumbhakar & Dan Wang, 2007. "Economic reforms, efficiency and productivity in Chinese banking," Journal of Regulatory Economics, Springer, vol. 32(2), pages 105-129, October.
  13. Berger, Allen N. & Hasan, Iftekhar & Zhou, Mingming, 2009. "Bank ownership and efficiency in China: What will happen in the world's largest nation?," Journal of Banking & Finance, Elsevier, vol. 33(1), pages 113-130, January.
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Cited by:
  1. Barros, Carlos P. & Chen, Zhongfei & Liang, Qi Bin & Peypoch, Nicolas, 2011. "Technical efficiency in the Chinese banking sector," Economic Modelling, Elsevier, vol. 28(5), pages 2083-2089, September.

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