IDEAS home Printed from
   My bibliography  Save this article

Opening the Black Box on Bank Efficiency in China: Does Economic Freedom Matter?


  • Fadzlan Sufian
  • Muzafar Shah Habibullah


The paper provides, for the first time, empirical evidence on the impact of economic freedom on bank efficiency in a developing economy. We employ the Data Envelopment Analysis method to compute the efficiency of the Chinese banking sector during 2000--2008. The empirical findings indicate that the inefficiency of the Chinese banking sector stems largely from scale rather than pure technical. By examining different dimensions of economic freedom, we find that not all are equally regressive on bank efficiency. We find that the impact of business freedom to be positive, implying that higher (lower) freedom for entrepreneurs to start businesses increases (reduces) bank efficiency. Similarly, monetary freedom is positively related to bank efficiency levels, indicating the importance of a stable and reliable monetary policy to business environment. On the other hand, the impact of financial freedom is negative, implying that higher (lower) financial freedom reduces (increases) the efficiency of banks operating in the Chinese banking sector.

Suggested Citation

  • Fadzlan Sufian & Muzafar Shah Habibullah, 2011. "Opening the Black Box on Bank Efficiency in China: Does Economic Freedom Matter?," Global Economic Review, Taylor & Francis Journals, vol. 40(3), pages 269-298, September.
  • Handle: RePEc:taf:glecrv:v:40:y:2011:i:3:p:269-298
    DOI: 10.1080/1226508X.2011.601633

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Mohd Alsaleh & A.S. Abdul-Rahim & H.O. Mohd-Shahwahid & Lee Chin & Fakarudin Kamarudin, 2016. "An Empirical Analysis for Technical Efficiency of Bioenergy Industry in EU28 Region Based on Data Envelopment Analysis Method," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 290-304.
    2. repec:spr:annopr:v:264:y:2018:i:1:d:10.1007_s10479-017-2719-5 is not listed on IDEAS
    3. Compton, Ryan A. & Giedeman, Daniel C. & Hoover, Gary A., 2014. "A distributional analysis of the benefits of economic freedom," European Journal of Political Economy, Elsevier, vol. 33(C), pages 121-133.
    4. Lin, Kun-Li & Doan, Anh Tuan & Doong, Shuh-Chyi, 2016. "Changes in ownership structure and bank efficiency in Asian developing countries: The role of financial freedom," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 19-34.
    5. repec:eee:rensus:v:78:y:2017:i:c:p:1331-1349 is not listed on IDEAS

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:glecrv:v:40:y:2011:i:3:p:269-298. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.