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What precludes the development of noninterest activities in Chinese commercial banks from the perspective of the price of interest activities?

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  • Maoyong Cheng
  • Hong Zhao
  • Junrui Zhang

Abstract

Noninterest activities of Chinese commercial banks remain sluggish. This article examines the price of interest activities and noninterest activities of Chinese commercial banks over 2000-2010 based on OLS and 2SLS regression. We find that the price of interest activities has a significant negative effect on the noninterest activities. It appears that controlled interest rate is the main hindrance of the development of noninterest activities, and the result is consistent with 'political' view. We also find that among state-owned commercial banks and nonstate-owned ones, the relationships of interest activities and noninterest activities are differential. The link between the price of interest activities and noninterest activities in state-owned commercial banks is stronger than that in nonstate-owned commercial banks. That is the result of different government intervention degree.

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  • Maoyong Cheng & Hong Zhao & Junrui Zhang, 2014. "What precludes the development of noninterest activities in Chinese commercial banks from the perspective of the price of interest activities?," Applied Economics, Taylor & Francis Journals, vol. 46(21), pages 2453-2461, July.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:21:p:2453-2461
    DOI: 10.1080/00036846.2014.881971
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    2. Qingxian An & Haoxun Chen & Jie Wu & Liang Liang, 2015. "Measuring slacks-based efficiency for commercial banks in China by using a two-stage DEA model with undesirable output," Annals of Operations Research, Springer, vol. 235(1), pages 13-35, December.
    3. Cheng, Maoyong & Zhao, Hong & Zhou, Mingming, 2020. "Foreign Strategic Investors, State Ownership, and Non-interest Activities: Evidence from China," Journal of Financial Stability, Elsevier, vol. 50(C).
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