Research On Banking Competition Degree In China

Since 1980s, because of changing in the external environment, information technology progressing, especially the network technology and communication technology development and application, the banking in worldwide has changed enormously. While after 30 years’reforming and opening up, economy of China has maintained a sustained growth and got a successful transformation. In the long run, it is a foundation to transformate economy that constructing a banking marked by robust finance and free price. This paper will try to answer these questions such as the competition degree of banking in China is high or not and what drives banks to competite.The paper apply CRn, HHI and Panzar-Rosse model to analyse the concentration and competition degree in China. In order to reveal the condition, we choose a sample set consisited of five large commercial bank, twelve nationwide equity commercial bank and forty-two municipal commercial bank. In consideration of the competition degree changing in different time and scale, we compare the H-value in different subsamples. We find that the competition degree in municipal commercial banks is a little lower than whole countries’, while the competition in four state-owned commercial bank is lower than that in nationwide equity commercial bank. The competition degree of whole banking in China is on the rise after 2000 year.After this, we turn to a small perspective which is Liaoning province, We want to find out whether the competition degree in a province will change with the whole country in different time. Result shows that the banking’s competition degree in Liaoning is lower than that of whole country, especially the labor price which is significant negative correlation with total income of banking. Talking about the changing as time, H-value shows the same feature with whole sample.What drives the banks to compete? Based on contestability theory, we test the competition degree with some variables such as market structure, contestability, structure in industry and economy development. Results show that contestability variable is significant with the competition degree in different contrise. Compared with market structure, regulation in banking is more important and significant.