Abstract: This paper applies the Panzar-Rosse’s H statistics to measure the power of China’s banking market and its evolution, using the unbalanced panel data of 125 banks operating in Chinese mainland from 1995 to 2011. At the same time, the market power of banks in different scale is measured by quantile regression method. The results show that the market structure is monopolistic competition in China’s banking industry during 1995-2011; the evolution of market power characters U-type profile; the market power of medium-sized banks is the strongest, followed by small banks, while the big banks are the weakest. The paper points out that the competitive reform has achieved some success by refusing the monopoly view about China’s banking, but there is diminishing marginal effect problem. Competitive strategies should be changed. For the inefficiency of the big banks, it should be addressed by divestiture and mechanism transformation.
Keywords: Power of Banking Market, Panzar-Rosse Model, Quantile Regression
source:Finance & Trade Economics ,No10,2013