The state of competition of the Chinese banking industry

This paper presents empirical assessments of the competitiveness of the banking industry in China during 1996-2000. Since asset concentration in China's banking industry does not seem to be decreasing, and since it has long been believed that banking industry concentration impairs competitiveness, it is worthwhile to assess the state of competition there. In this paper, we use the Panzar-Rosse method in various ways in order to ensure the robustness of the results. The conclusion is that the banking system in China was already near a state of perfect competition before foreign banks began to enter China's financial market.