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The Impact of Deregulation Trends on the Chinese Banks' Interest Margins

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  • Ming Qi
  • Ying Jiang
  • Xuan Liu

Abstract

In this paper, we examine the impact of deregulation trends and foreign bank entry on the net interest margins of China’s banking sector. By comparing the banks’ net interest margins before and after the banking liberalization, we investigate the impact of the financial deregulation and the presence of foreign banks on the profitability of Chinese banks. The results indicate that the entrance of foreign banks has strong negative effects on the profitability of domestic banks. The credit risk is the major factor to enhance the profitability of the Chinese domestic banks.

Suggested Citation

  • Ming Qi & Ying Jiang & Xuan Liu, 2023. "The Impact of Deregulation Trends on the Chinese Banks' Interest Margins," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(3), pages 1-21, March.
    • Handle: RePEc:ibn:ijefaa:v:15:y:2023:i:3:p:21
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    References listed on IDEAS

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    1. Kasman, Adnan & Tunc, Gokce & Vardar, Gulin & Okan, Berna, 2010. "Consolidation and commercial bank net interest margins: Evidence from the old and new European Union members and candidate countries," Economic Modelling, Elsevier, vol. 27(3), pages 648-655, May.
    2. Allen, Linda, 1988. "The Determinants of Bank Interest Margins: A Note," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(2), pages 231-235, June.
    3. Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, vol. 21(1), pages 55-87, January.
    4. Carbo Valverde, Santiago & Rodriguez Fernandez, Francisco, 2007. "The determinants of bank margins in European banking," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2043-2063, July.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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