An Analysis Of The China’s Commercial Banking Competition And Banks’ Stability

In recent years, with the deepening of property right reform of China’s banking and othersmall and medium-sized banks to develop and grow, as well as the full penetration of foreignbanks, China’s commercial banks are facing the new market environment. Under themarket-oriented, the banking competition will be fierce, and the competition will also have animpact on the banks’ stability.Theoretically, scholars are no consensus on the relationship between banking competition andbanks’ stability, so this relationship needs to analyze with specific empirical tests of marketenvironment. Under the analysis of the related literature, I established the appropriate PR model tomeasure China’s banking competition, and measure the degree of competition of China’s bankingindustry based on16listed banks from2002to2010by this, and measure the stability of16banksbased on shares’ prices by z index. Finally, using the data I established the panel date to regress therelationship between banking competition and banks’ stability. The regression results show thatChina’s banking competition conducive to the improvement of banks’ stability in the currentmarket environment.The innovation of this paper is, by the introduction of the H index and Z index widelyaccepted by foreign scholars I measure the degree of competition in the China’s banking sector andbanks’ stability, and established the empirical model based on H-index and the Z index to test therelationship between China’s banking competition and banks’ stability in the current marketenvironment, to provide empirical support for China’s further financial reform.