Reseach On The Degree Of Competition In China’s Financial Market: Based On Panzar-Rosse Model

In the international riding the waves, the International Finance Group wasgrowing stronger and stronger, and blured the boundaries between the traditionalfinancial sector and financial products. Domestic scholars have explored thepossibility of China’s financial industry to go the road of mixed operation withinternational standards and pointed out that the cooperation of the Banking,Securities and Insurance is the only way of development of financial industry atthis stage. This paper’s testing for the degree of competition of China’s financialmarkets would have an important significance in promoting the practice of China’sfinancial reform and innovation, developling appropriate policies and regulatoryand improving the overall competitiveness of China’s financial industry.This paper studied the degree of competition of China’s financial industryfrom the perspective of cooperation of Banking, Securities industry and Insuranceindustry. Firstly we described the background of the cooperation of Banking,Securities industry and Insurance industry, followed by literature review ofdomestic and foreign financial market competition degree research, then selectedthe PR model as a research method on the basis of competition theory of industrialorganization.Second, we analysed the applicability of the PR model in China’sfinancial industry, then built a PR model for China’s financial industry consideringcommon factors to the financial industry. At last we conducted an empirical test toaccessing the degree of competition of the overall markets consisted of banking,Securities industry and Insurance industry, and the degree of competition ofbank-securities sector, bank-insurance sector, securities-insurance sector and thesingle market.The empirical results showed that: during the period of2004-2010years,China’s financial industry generally was monopolistic competition structure, thelevel of monopoly declined and the level of competition increased. In addition tobank-securities markets and securities-insurance markets to were completelymonopoly in2003-2006, bank-securities markets, bank-insurance markets,securities-insurance markets were basically rendered as a monopolistic competitionstructure in the whole period. The single market of bank, securities and insurance almostly was in a monopolistic competition, only the insurance industry showing amonopoly structure in2007-2010. The overall degree of competition in China’sfinancial market was determined mainly by bank-securities markets and thebank-insurance markets, and there was mutual restraint of competitive relationamong the markets. Finally, the article combined the actual empirical results withreasonable explanations.