Operational performance of commercial banks in the Chinese transitioal economy

Since the process of economic reform began in China, the Chinese banking system has grown impressively. The aim of this paper is therefore to examine the differences in operational efficiency between China's state-owned commercial banks (SCBs) and shareholding commercial banks using pooled cross-section and time-series data to observe the period between 1996 and 2002. The results showed that, on average, shareholding commercial banks have lower operating costs than the SCBs; that is to say, they display a higher level of "vitality", and greater efficiency. The empirical results also indicated that there has been a significant improvement in the overall operational performance of China's commercial banks in the last few years. By 2002, average operating costs were much lower than during the period 1996-1998. This improvement is clearly related to the growth of the shareholding commercial banks.