Ownership Reform, Foreign Competition, and Efficiency of Chinese Commercial Banks: A Non-Parametric Approach

Since China joined the WTO in 2001, the pressure for bank reforms has mounted as China ought to fully open up its financial market to foreign competition by 2006. Efficiency is key for domestic banks to survive in a liberalised environment, but it appears that the last hope for raising bank efficiency is through ownership reform. Whether ownership reform and foreign competition can solve China?s banking problem remains to be tested. This paper aims to answer this question through using a non-parametric approach to analyse the efficiency changes of 15 large commercial banks during 1998-2005. We find that ownership reform and foreign competition have forced the Chinese commercial banks to improve performance, as their total factor productivity rose by 5.6 per cent per annum. This coincides with the recent bullish Chinese stock markets led by three listed state-owned commercial banks. Despite such encouraging results, we remain cautious about the future of the Chinese banks, as the good results may have been artificially created with massive government support and the fundamentals of the banks may be still weak.data envelopment analysis (DEA), efficiency, banking, China

Correlation between intercalated magnetic layers and superconductivity in pressurized EuFe2(As0.81P0.19)2

We report comprehensive high pressure studies on correlation between intercalated magnetic layers and superconductivity in EuFe2(As0.81P0.19)2 single crystal through in-situ high pressure resistance, specific heat, X-ray diffraction and X-ray absorption measurements. We find that an unconfirmed magnetic order of the intercalated layers coexists with superconductivity in a narrow pressure range 0-0.5GPa, and then it converts to a ferromagnetic (FM) order at pressure above 0.5 GPa, where its superconductivity is absent. The obtained temperature-pressure phase diagram clearly demonstrates that the unconfirmed magnetic order can emerge from the superconducting state. In stark contrast, the superconductivity cannot develop from the FM state that is evolved from the unconfirmed magnetic state. High pressure X-ray absorption (XAS) measurements reveal that the pressure-induced enhancement of Eu's mean valence plays an important role in suppressing the superconductivity and tuning the transition from the unconfirmed magnetic state to a FM state. The unusual interplay among valence state of Eu ions, magnetism and superconductivity under pressure may shed new light on understanding the role of the intercalated magnetic layers in Fe-based superconductors

Giant magnetic quantum oscillations in the thermal conductivity of TaAs: Indications of chiral zero sound

Charge transport of topological semimetals has been in the focus of intensive investigations because of their non-trivial band topology. Heat transport of these materials, on the other hand, is largely unexplored and remains elusive. Here we report on an observation of unprecedented, giant magnetic quantum oscillations of thermal conductivity in the prototypical Weyl semimetal TaAs. The oscillations are antiphase with the quantum oscillating electronic density of states of a Weyl pocket, and their amplitudes amount to two orders of magnitude of the estimation based on the Wiedemann-Franz law. Our analyses show that all the conventional heat-transport mechanisms through diffusions of propagating electrons, phonons and electron-hole bipolar excitations, are far inadequate to account for these phenomena. Taking further experimental facts that the parallel field configuration favors much higher magneto-thermal conductivity, we propose that the newly proposed chiral zero sound provides a reasonable explanation to these exotic phenomena. More work focusing on other topological semimetals along the same line is badly called for.Comment: 15 pages, 5 figure

Research Paper No. 2008/38 Ownership Reform, Foreign Competition, and Efficiency of Chinese Commercial Banks A Non-Parametric Approach

Since China joined the WTO in 2001, the pressure for bank reforms has mounted as China ought to fully open up its financial market to foreign competition by 2006. Efficiency is key for domestic banks to survive in a liberalised environment, but it appears that the last hope for raising bank efficiency is through ownership reform. Whether ownership reform and foreign competition can solve China’s banking problem remains to be tested. This paper aims to answer this question through using a non-parametric approach to analyse the efficiency changes of 15 large commercial banks during 1998-2005. We find that ownership reform and foreign competition have forced the Chinese commercial banks to improve performance, as their total factor productivity rose by 5.6 per cent per annum. This coincides with the recent bullish Chinese stock markets led by three listed state-owned commercial banks. Despite such encouraging results, we remain cautious about the future of the Chinese banks, as the good results may have been artificially created with massive government support and the fundamentals of the banks may be still weak

WTO challenges and efficiency of Chinese banks

After joining the World Trade Organisation (WTO) in December 2001, China was given 5 years to completely open up its banking market for international competition. Chinese banks have been renowned for their mounting nonperforming loans and low efficiency. Despite gradual reforms, the banking system is still dominated by state ownership and encapsulated monopolistic control. How to raise efficiency is a key to the survival and success of domestic banks, especially the state-owned commercial banks. Two important factors may be responsible for raising efficiency: ownership reform and hard budget constraints. This article uses a panel data of 22 banks over the period 1995 to 2001, and employs a stochastic frontier production function to investigate the effects of ownership structure and hard budget constraint on efficiency. Empirical results suggest that nonstate banks were 8-18% more efficient than state banks, and that banks facing a harder budget tend to perform better than those heavily capitalized by the state or regional governments. The results shed important light on banking sector reform in China to face the tough challenges after WTO accession.

Economic growth in the presence of FDI: the perspective of newly industrializing economies

This article presents two propositions on the role of FDI in economic growth: (1) FDI is a mover of production efficiency and (2) FDI is a shifter of the host country's production frontier. It then employs a production function with a large panel data set from the Chinese regions over 1979-2003 to test the propositions.

Bank ownership, privatization, and performance: evidence from a transition country

This paper combines the static effect of ownership and the dynamic effect of privatization on bank performance in China over 1995-2010, reporting a significantly higher performance by private intermediaries – joint stock commercial banks and city commercial banks – relative to state-owned commercial banks. However, publicly traded banks, subject to multiple monitoring and vetting in capital markets, perform better regardless of ownership status. The privatization of banks has improved performance with respect to revenue inflow and efficiency gains in the short- or long-run (initial public offerings). The positive long-run effect is more relevant and significant for banking institutions with minority foreign ownership. Moreover, this paper innovatively estimates interest income efficiency and non-interest income efficiency at the same time. The results suggest that Chinese banks are much more efficient in generating interest income than raising non-interest revenue, although the latter aspect has improved significantly during the sample period