| Content | This paper estimates the cost and pro
t e¢ ciency of Chinese domestic
banking sector to evaluate the e¤ectiveness of Chinas
nancial reforms since
1978. We use the performance of foreign banks as the benchmark because for-
eign banks, subject to intensive worldwide competition, are perceived as pos-
sessing superior governing structure and organization, more advanced technolo-
gies and better trained labor force. On the other hand, competition in Chinas
banking sector is mainly in the form of nonprice measures, thus putting foreign
banks at a disadvantage. We
nd domestic banks have gradually caught up the
cost advantage of foreign banks in a manner consistent with the increased com-
petitive pressure. On the other hand, the pro
t advantage of domestic banks
over foreign banks is widening because of institutional arrangements, cultural
and social networks as well as the pro
t scope and revenue scale economy. |
