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Banking performance of China and Pakistan

Jia Xin Xu (), Naiwen Li () and Muhammad Ishfaq Ahmad ()
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Jia Xin Xu: Liaoning Technical University, China
Naiwen Li: Liaoning Technical University, China
Muhammad Ishfaq Ahmad: University of Lahore, Pakistan

Entrepreneurship and Sustainability Issues, 2018, vol. 5, issue 4, 929-942

Abstract: This study aims to investigate the comparative performance of the banks of the china and Pakistan, as both countries have very strong business relationships apart from the strategic relationships. The recent investment contracts between two countries “One Belt One road†worth $54 billion motive me to do examine the comparative performance of Chinese and Pakistani banks as banks do have vital role in this regard. To give first sight understanding of the objectives of the study, I choose the title which explains the objectives of the study clearly as starting with the comparative study of the banking performance of both countries. As the banks play a magnificent role in an economy for the smooth as well as efficient functioning of the different activities of the society. The importance of the banking could be realized by taking the example of the blood in human body as banks provides blood to the economy of any country. Due to their important role, it is strong need to keep banking sector healthy and stable which is not possible without the continuous focus on it. Recent economic crunch has highlighted that a well-established financial system is the basic ingredient for the economic growth. So it is very important to know what factors derive the performance of the banks. This study main focus is to identifying the factors determining the profitability of the Chinese and Pakistani banking sector. China becomes the economic hub for rest of the world and Chinese banking is also growing significantly. The importance of the Chinese banks could be realized that four Chinese banks are ranked among the top big firms of the world. The study used the Chinese and Pakistani banking sector sample which includes all kinds of banks over the time span of 2010 to 2017. The Chinese banking sample consists of forty four banks while Pakistani banks sample consists of twenty one banks. We observed that Chinese banking profitability which is measured through the Return on Assets (ROA) and Return on Equity (ROE), is positively influenced by the net interest income, deposits, Capital adequacy ratio and GDP growth while non-performing loans are significantly contribute to the performance of the Chinese banking. This relationship exist the same in the Pakistani banking industry. Moreover we found that Chinese banks are performing better than the Pakistani banks because of their big size, higher growth in GDP and due to the government ownership. Furthermore I also conclude this is the golden time for the Chinese banks to go across the border to gain the lucrative opportunity in the Pakistan as the Gawader Seaport is managed by the Chinese government to channel their trade to the Europe. By doing so they cannot only increase their Chinese market share but international market share. Moreover we found that Chinese listed banks perform much better than the unlisted banks of china. Although some unlisted banks perform nicely but overall listed banks produced sound results. Through getting listed and managing the financial resources, they can do cross border business either by mergers, joint ventures or acquisition to overcome the cultural issues. In the case of Pakistan, we observed that foreign banks beat both the domestic private banks and state owned banks. We ranked domestic private banks at number two and state banks performed poorly in case of Pakistan. In the Comparison of Chinese and Pakistani bank, Chinese banks are better than Pakistani banks the factors for the performance react in the same way.

Keywords: banks’ performance; Return on Equity (ROE); non-performing loans; listed banks; GDP (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.9770/jesi.2018.5.4(16)

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