Does the Government Drive Chinese Banking Performance – An Analysis of the Chinese Banking System

Abstract

We evaluate the Chinese government, foreign investors and private investors’ financial impact upon Chinese banking performance. The paper focuses on major banks within China and evaluates the relationship between the ownership structure and the overall financial performance of the Chinese banks. Our findings span the period of 2001-2016 and show a very strong inverse relationship between bank performance measures in high government ownership Chinese banks. Furthermore, we find positive relationship between private and foreign ownership levels and Chinese bank performance. We conclude that Chinese government ownership’s primary motive is not optimal financial performance, but other non-financial motives.