Evaluating the Effectiveness of China's Financial Reform The Efficiency of China's Domestic Banks-Wang Yanan Institute for Studies in Economics (WISE), Xiamen University

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作者	Cheng Hsiao, Yan Shen, Wenlong Bian
正文	This paper estimates the cost and prot 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 prot advantage of domestic banks over foreign banks is widening because of institutional arrangements, cultural and social networks as well as the prot scope and revenue scale economy.
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