Research On Profitability Of Commercial Banks In China

Commercial banks play an important role in China's financial system. Because China's commercial banks have many problems, the market reform is far from over. In the current volatile economic environment, the pressing issue for China's banking industry is how to meet challenges and seize opportunities.Profitability is the bank's core competence, so improving profitability is the key to enhancing competitiveness. Therefore, the research on bank profitability is of very important significance. This paper conducts a comprehensive and systematic study on the profitability of commercial banks in China. The paper consists of five parts.The first part is the introduction. This part describes the background and significance, reviews domestic and foreign literature, and introduces research methods, framework, innovations and shortcomings.The second part is the theory. First, this chapter explains the enterprise capabilities, profitability and other basic concepts. Then it explores influence factors from the microscopic, mesoscopic and macroscopic level. Microscopic factors include bank size, capital strength, asset quality, revenue structure, management efficiency and liquidity. Mesoscopic factors include banking market structure, financial market structure and foreign bank entry. Macroscopic factors include economic development, inflation, monetary policy and tax burden.The third part is the evaluation of bank profitability. First, this chapter introduces the development process of China's commercial banking system, and then analyzes the profitability changes. It selects three indicators to measure the profitability, and dose the comparative analysis of different types of commercial banks. State-owned commercial banks' profitability is greatly improved after the joint-stock reform. Joint-stock commercial banks' profitability maintains at a high level and grows steadily. The profitability of city commercial banks is the lowest, but it grows fastest in recent years.The fourth part is the empirical research. After selecting the measure indicator of each influence factor, the author uses panel data of 28 domestic banks in 2000-2009 periods to make an empirical analysis on the effects for national commercial banks and city commercial banks respectively. The conclusion suggests that the influence of internal factors is greater than external factors. And there are inconsistent results for two types of banks on bank size, financial market structure, inflation and monetary policy. Meanwhile, two groups of banks have different sensitivity on other factors.The fifth part is the suggestion. Based on the previous analysis, current situations and future changes, the author tries to provide some advices to the improvement of the profitability of Chinese banking, including enhancing the level of bank management, handling the relationship between domestic and foreign banks correctly, responding to the risk of monetary policy adjustments actively and reducing the tax burden of the banking sector.