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Cost efficiency, technological progress and productivity growth of Chinese banking pre- and post-WTO accession

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  • Rasoul Rezvanian
  • Rima Turk Ariss
  • Seyed Mehdian

Abstract

China has recently taken substantial steps to reform its banking sector, particularly after joining the World Trade Organization (WTO) in December 2001. This study examines the effect of recent banking reforms and WTO accession on the cost efficiency of Chinese banking and the efficiency differentials across different bank ownership groups. We use a nonparametric approach to investigate the efficiency trend and productivity growth of banks between 1998 and 2006 prior to and after joining the WTO. We find that, on average, domestic banks outperform their foreign counterparts over the sample period in terms of overall and allocative efficiencies, but they fall behind in terms of overall technical efficiency. A pre- and post-WTO accession analysis reveals that the efficiency of domestic banks has declined post-accession, while foreign banks have enjoyed an improvement in their cost efficiency post-WTO accession. The findings further suggest that the total factor productivity of Chinese banks has weakened over the period under study. However, total factor productivity has increased for both domestic and foreign banks after China joined the WTO, equally owing to efficiency improvement and technological progress.

Suggested Citation

  • Rasoul Rezvanian & Rima Turk Ariss & Seyed Mehdian, 2011. "Cost efficiency, technological progress and productivity growth of Chinese banking pre- and post-WTO accession," Applied Financial Economics, Taylor & Francis Journals, vol. 21(7), pages 437-454.
  • Handle: RePEc:taf:apfiec:v:21:y:2011:i:7:p:437-454
    DOI: 10.1080/09603107.2010.532110
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    References listed on IDEAS

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    4. Garcia-Herrero, Alicia & Santabárbara, Daniel, 2008. "Does the Chinese banking system benefit from foreign investors?," BOFIT Discussion Papers 11/2008, Bank of Finland, Institute for Economies in Transition.
    5. Shujie Yao & Chunxia Jiang & Genfu Feng & Dirk Willenbockel, 2007. "WTO challenges and efficiency of Chinese banks," Applied Economics, Taylor & Francis Journals, vol. 39(5), pages 629-643.
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    Cited by:

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    2. Imad Bou-Hamad & Abdel Latef Anouze & Denis Larocque, 2017. "An integrated approach of data envelopment analysis and boosted generalized linear mixed models for efficiency assessment," Annals of Operations Research, Springer, vol. 253(1), pages 77-95, June.
    3. Roger Frantz, 2017. "Rationality, globalization, and X-efficiency among fi nancial institutions," Chapters, in: Morris Altman (ed.), Handbook of Behavioural Economics and Smart Decision-Making, chapter 15, pages 275-289, Edward Elgar Publishing.
    4. Robin C. Sickles & Wonho Song & Valentin Zelenyuk, 2018. "Econometric Analysis of Productivity: Theory and Implementation in R," CEPA Working Papers Series WP082018, School of Economics, University of Queensland, Australia.
    5. Chang-Sheng Liao, 2018. "Risk-taking and Efficiency of Banks for Emerging Eastern Asian Countries," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 8(5), pages 1-2.
    6. Bing Xu & Adrian Van Rixtel & Michiel Van Leuvensteijn, 2013. "Measuring bank competition in China: a comparison of new versus conventional approaches applied to loan markets," BIS Working Papers 422, Bank for International Settlements.

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