WTO accession, foreign bank entry, and the productivity of Chinese manufacturing firms

Tat-kei Lai, Zhenjie Qian and Luhang Wang

Journal of Comparative Economics, 2016, vol. 44, issue 2, 326-342

Abstract: After China’s accession to the World Trade Organization (WTO) in December 2001, foreign banks are allowed to enter the Chinese banking market in phases. Using firm-level data from the National Bureau of Statistics of China which cover all state-owned and non state-owned manufacturing firms with sales over 5 million RMB, we examine the relationship between foreign bank entry and the industry-level productivity growth of China’s manufacturing sector. Our empirical results suggest that (a) on average, opening up a region for foreign bank entry has no impact on aggregate productivity growth, (b) however, industries more dependent on external finance grow faster after a region is opened up for foreign bank entry, and (c) these results are due to changes in technical efficiency rather than reallocation. Overall, this paper provides new evidence on the relationship between banking market structure and manufacturing productivity in a fast growing developing country.

Keywords: China; Foreign bank entry; WTO; TFP; Technical efficiency; Reallocation (search for similar items in EconPapers)
JEL-codes: D24 G21 O14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:44:y:2016:i:2:p:326-342

DOI: 10.1016/j.jce.2015.06.003

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