Comparative Performance of Chinese Commercial Banks: Analysis, Findings and Policy Implications

Shanling Li, Feng Liu, Suge Liu and G. A. Whitmore

Review of Quantitative Finance and Accounting, 2001, vol. 16, issue 2, 149-70

Abstract: This paper investigates the financial performance of Chinese banks by using financial ratio analysis. The analysis shows that the low profitability of state-owned commercial banks results from their higher ratio for non-interest expenses and lower interest margin than joint-equity banks. The much lower profit margin in state-owned banks draws down their levels of ROE and ROA, even with the offsetting effects of more efficient utilization of their assets and higher financial leverage. Although data limitations prevent us from studying the risk profiles of the banks in detail, it is clear that these Chinese banks generated lower returns with higher financial risks than their Western counterparts. The paper concludes with a discussion of major issues affecting Chinese bank performance. Significant difficulties encountered in assessing bank performance are also identified and discussed. Copyright 2001 by Kluwer Academic Publishers

Date: 2001
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