A Study Of The Relationship Between The Market Structure And The Performance Of China's Banking Industry

This Thesis studies the relationship between the market structure and the performance of China's banking industry, which is mainly composed of four big state-owned commercial banks.According to the form of monopoly, the oligarchic monopoly market structure of banking industry can be classified as either economic monopoly or administrative monopoly, and generally the economic monopoly could be rational and efficient. This Thesis studied China's banking industry using economic theories such as the Theory of Industrial Organization, Competition Theory and Rent-Seeking Theory. The author makes a conclusion that the current market structure of China's banking system is an administrative monopoly. Furthermore the author declares that the rent-seeking activities among the state-owned commercial banks and the relevant stakeholders are with low efficiency and high risk. Such a structure also results in the lack of technical innovation, and prohibits the industry from reaching the scale of economy.The situation is critical and the banking industry requires immediate and serious improvement. A new market structure must be built into the industry to encourage competition. To achieve better efficiency the current "administrative monopoly" structure must be abandoned.