China¡¯s Banking System, Market Structure, and Competitive Conditions

This paper presents an empirical assessment of the market structure and the competitive conditions of the Chinese banking sector. We applied the Panzar-Rosse H-statistic on the data collected from a panel including 16 most significant Chinese banks for the period 2004¨C2007. Equilibrium tests and the competitive conditions tests were applied on the data. From the pooled regression in the whole period, we found that the banking sector in China for 2004¨C2007 was monopolistically competitive. We also show that the Chinese banks were not able to achieve high records of profitability in monopolistically competitive markets.