Market structure, welfare, and banking reform in China

► This paper examines the effects of market reform on consumers and state commercial banks in China. ► Overall, China's banking reforms have achieved mixed results in the deposit market. ► There is a welfare gain from more consumers joining in the market, but the existing consumers suffer welfare losses due to declined service quality. ► The welfare effects are unevenly distributed, with losses skewed toward inland provinces and certain consumer groups. ► The price-cost margins of some state commercial banks have fallen over time, but the pricing of banking services has not become more competitive.