Banking Sector In China Research Articles

Prospects for the development of foreign economic activities of the Russia banking sector in China

Relevance. In modern conditions of economic uncertainty and difficulties of doing business in connection with the application of sanctions, banks need to look for effective tools and ways to increase the effectiveness of mutual cooperation with other states to overcome the prevailing circumstances. During the work, the main aspects of opening and functioning of a bank branch in China were considered, as well as competitors at both the macro and micro levels were analyzed. Based on the SWOT analysis, the paper identifies the strengths and weaknesses, opportunities and threats of introducing a branch of a Russian bank into the Chinese banking market. The study identifies promising regions for the development of foreign economic activity and forms a range of banking services that contribute to the sustainable development of the branch of the Russian bank in the foreign market.The purpose of the study is to substantiate the need to develop the foreign economic activity of a Russian commercial bank in China.Objectives: Based on a comprehensive analysis and acceptability of the Chinese banking services market, an assessment of the current state of PJSC Expobank, an analysis of competitors in the proposed region and the specifics of a specific location, to develop a plan for opening a bank branch in China.Methodology. The study is aimed at achieving this goal and is based on a review of scientific research by both domestic and foreign economists, as well as an analysis of a number of requirements for opening a bank branch in China.Results. In the course of the work, the process of opening a bank branch in China for carrying out activities was analyzed, the advantages and disadvantages of expanding the boundaries of presence were identified, and promising areas for starting foreign economic activity were proposed.Conclusions. The conducted research gives grounds to conclude that the expansion of the geographical presence in China will allow PJSC Expobank to gain access to world economic centers and expand the boundaries of its activities.

Does Bank Monitoring Reduce Corporate Misreporting? Evidence from Foreign Bank Entry in China

We propose a model of bank monitoring and borrower financial misreporting. Using the staggered liberalization of the banking sector in China as a natural experiment, we find that, consistent with the model’s prediction, entry by more efficient foreign banks reduces corporate misreporting fraud. Fraud reduction is greatest among borrowers of foreign banks, but fraud also drops among borrowers of domestic banks, suggesting a spillover effect. As predicted by the model, fraud reduction is greatest for borrowers with higher levels of fixed assets or lower levels of current assets. Our evidence suggests that improved bank monitoring reduces financial misreporting. This paper was accepted by Tomasz Piskorski, finance. Funding: M. Li acknowledges support from the National Science Foundation of China [Project 71402078] and the Social Science Foundation of Tsinghua University [Project 2013WKZD004]. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2022.02414 .

Research on Credit Risk Measurement and Management of Commercial Banks in China

This comprehensive study explores the sophisticated landscape of credit risk measurement and management within the commercial banking sector of China, a critical component in maintaining the resilience and stability of its burgeoning financial system. As China's economy continues to integrate with the global market, its banking sector faces escalating credit risk challenges, necessitating advanced and effective management strategies. This paper critically examines the existing methodologies for measuring credit risk, including both traditional approaches and modern innovations that leverage big data and artificial intelligence, assessing their applicability and efficiency in the Chinese context. Moreover, we delve into the multifaceted strategies employed by Chinese commercial banks to manage credit risk, focusing on the integration of regulatory frameworks, technological advancements, and best practices in risk management. Through a methodical review of literature and case studies of prominent Chinese banks, this study identifies key trends, challenges, and opportunities in credit risk management. We evaluate the effectiveness of current practices and propose a set of strategic recommendations aimed at enhancing the robustness of credit risk management systems. These include adopting a more holistic approach to risk assessment, leveraging technology to predict and mitigate risk, and fostering a culture of risk awareness and compliance.

Evaluating financial fragility: a case study of Chinese banking and finance systems

Global financial systems are inherently fragile due to their complexities. Thus, it is of great interest to devise various methods to assess the dynamics of financial fragility. As such, this study builds a financial fragility evaluation index system. The study finds three major fluctuations in the trend of financial fragility due to the great recession in 2008, the huge financial volatility in 2015, and the COVID-19 pandemic in 2019. It also tests the index system on the Chinese finance market from 2007 to 2022. Observations of capital adequacy, non-performing loans, and liquidity ratios, in addition to the average return on total assets, are used to assess banking fragility. The results attained show that amongst the tested banks, the Bank of Ningbo has the lowest vulnerability score, mainly due to its higher average return on total assets, capital adequacy ratios, and lower non-performing loan ratio. On the other end of the spectrum, China Minsheng Bank has the highest vulnerability score due to its lower capital adequacy and higher non-performing loan ratios. These findings provide valuable insights into the banking sector in China for policy formulation.

The Real Effects of Shadow Banking: Evidence from China

We provide firm-level evidence on the real effects of shadow banking in terms of technological innovation. Firm-to-firm entrusted loans, the largest part of the shadow banking sector in China, enhance the borrowers’ innovation output. The effects are more prominent when the borrowers are subject to severer financial constraints, information asymmetry, and takeover exposures. A plausible underlying channel is capital reallocations from less productive but easily financed lender firms to more innovative but financially less privileged borrower firms. Our paper suggests that shadow banking helps correct bank credit misallocations and thus, serves as a second-best market design in financing the real economy. This paper was accepted by Kay Giesecke, finance. Funding: X. Tian and Y. Wang acknowledge financial support from the National Natural Science Foundation of China [Grant 71825002] and the Beijing Outstanding Young Scientist Program [Grant BJJWZYJH012019100003014]. G. Tu acknowledges financial support from the National Natural Science Foundation of China [Grant 72010107001]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.00953 .

Assessing the Complex Interplay of China’s Fertility Policy Adjustments and Female Employment Dynamics: An In-depth Analysis of the Digitalized HRM Landscape in the Age of AI and Big Data

The fertility policy adjustments are occurring against a backdrop of rapid technological advancement, characterized by the integration of big data analytics and artificial intelligence (AI) into human resource management (HRM) practices. In the banking sector, as in many other industries, the adoption of these technologies has become increasingly pervasive. This study explores the intricate relationship between fertility policy adjustments, the integration of big data and AI in HRM practices, and employee satisfaction within China's banking sector. In response to evolving demographic and technological landscapes, the research aims to uncover how fertility policy adjustments influence female employment dynamics, the adoption of big data and AI in HRM, and ultimately, employee satisfaction. Utilizing a quantitative research design, structured surveys were administered to female bank employees. The resulting data were rigorously analyzed using the Statistical Package for the Social Sciences (SPSS). The study underscores the practical significance of optimizing HR technologies, particularly big data analytics and AI, for enhancing both HR functions and employee satisfaction. It also emphasizes the importance of data-driven HR practices and predictive employee retention strategies as crucial tools in creating responsive and supportive work environments. Additionally, this research contributes to HRM theory by recognizing the pivotal role that technology integration plays in shaping modern HR strategies and organizational success. While acknowledging its limitations, this study lays the foundation for future research, including studies that are longitudinal, comparative, and qualitative studies, to offer a more comprehensive understanding of the complex dynamics in the contemporary workplace.

Unveiling the Nexus: Digital Transformation Leadership, Business Model Innovation, and Performance in China's Banking Sector

This research investigates the impact of Digital Transformation Leadership on Digital Transformation (DT) performance in China's banking sector. It examines the mediating role of Incremental and Disruptive Business Model Innovation (BMI) and the moderating effect of Data-Driven Insights. Through regression analysis and hypothesis testing, the study confirms positive correlations between DT Leadership and both forms of BMI, as well as their significant contribution to DT performance. Moreover, it identifies the mediating effect of BMI on the relationship between DT Leadership and DT performance. Additionally, Data-Driven Insights are found to positively moderate the relationship between DT Leadership and BMI. These findings highlight the critical role of effective leadership and innovative strategies in driving digital transformation in the banking industry, emphasizing the importance of data-driven decision-making. The study contributes to the existing literature by providing insights into the mechanisms underlying DT in the banking sector, offering practical implications for industry practitioners and policymakers.

The impact of banking regulatory policies on the expansion of shadow banking business in China

To better examine how shadow banking activities are affected by banking regulation, this paper uses the implementation of new regulatory standards in China's banking sector in 2011 as a quasi-natural experiment to test whether China's banking regulatory policies were effective in curbing shadow banking activities from 2007 to 2019 using data on banks' entrusted loans to measure the size of shadow banking business. The findings of this study are as follows: Firstly, the new regulatory standards had effectively inhibited the development of shadow banking business such as entrusted loans. Mechanism analysis showes that CAR had a significant positive impact on entrusted loans, once the CAR fell, the entrusted loans decreased. Meanwhile, the higher the LIR was, the more shadow banking activities Chinese banks were likely to engage in. Further insight reveales that among banks with larger assets and higher profitability, the impact of the new regulatory policies on shadow banking business was more significant. The results remain robust when the paper also consideres the policies issued in 2017 for shadow banking. The findings of this paper demonstrate the actual effect of China's regulation on shadow banking from a micro perspective and provide a scientific and theoretical basis for the implementation of regulatory policies.

Impact of Characteristics of Board of Directors Towards Risk-Taking Level with Chinese Commercial Banks

Based on the situation that the overall economy is facing a huge shock due to COVID-19, China's banking sector plays an extremely important role as a provider of funds in the social economy and risk management is even more important. Therefore, this paper uses the Chinese commercial banks as a research sample of 730 from 2017 to 2021 and explores the moderating role of three board structure characteristics, namely, the board size, the combination of chairman and president, and the proportion of independent directors, on the relationship between banks' operation risk include market risk, credit risk and liquidity risk and risk-taking level in empirical approach method. The research findings revealed that: 1. liquidity ratio and cost-to-income ratio have a significant negative effect on the risk-taking level of commercial banks. 2. Board size has a negative moderating effect on the relationship between liquidity ratio and risk-taking level, which means that a larger board size can help reduce the effect of liquidity ratio on the risk-taking level of commercial banks. 3. Board size has a negative moderating effect on the risk-taking level of commercial banks. 4. The separation of chairman and president has a positive moderating effect on the relationship between liquidity ratio and risk-taking level, which means that having a different chairman and president may increase the impact of poor liquidity ratio on the risk-taking level of commercial banks. However, the cross-section of the cost-of-income ratio and independent director ratio has no significant effect on the risk-taking level. This paper also makes recommendations based on the findings of the study.

Renewable energy, natural resources, technological innovation, and consumption‐based carbon emissions in China: Tracking environmental neutrality

AbstractAlthough numerous empirical studies have scrutinized the impact of technological innovation, renewable energy, and natural resources on carbon emissions (CCO2), there is a lack of empirical knowledge of consumption‐based CCO2 emissions. This study examines the impacts of technological innovation, renewable energy, and natural resources factors on CCO2 emissions in China. In addition, the present work considers the role of the banking sector in environmental neutrality in China from 1990 to 2019. For this purpose, the sophisticated approach of “bootstrap autoregressive distributed lag (BARDL)” is applied to explore the association of the selected indicators on CCO2. The outcomes indicate that (i) economic growth and natural resources negatively impact environmental neutrality; (ii) environment‐related technologies and renewable energy are crucial to promoting environmental neutrality; and (iii) banking sector in China has a positive association with CCO2 emissions. The findings of this work recommend using effective measures to mitigate ecological pollution by using green energy sources and strengthening the banking sector by offering environment‐friendly investment loans. Likewise, strategies should be designed that reinforce sustainable development.

Antecedent Configurations of ESG Disclosure: Evidence from the Banking Sector in China

This study examines the complex joint effect of firm and board characteristics on environmental, social, and governance (ESG) disclosure by Chinese listed banks, viewed from a configurational perspective. By utilizing fuzzy-set qualitative comparative analysis (fsQCA) on a sample of 33 Chinese listed banks from 2020, we obtained results that explain some of the inconsistent findings in the current literature and suggest that four specific configurations of firm and board characteristics are equally conducive to high levels of ESG disclosure. Specifically, bank attributes (i.e., size, state ownership, and cross-listing) are the most salient aspects of promoting ESG disclosure, but the final effect relies on a combination of these attributes and other board characteristics (i.e., board size, independence, gender diversity, and a corporate social responsibility committee). We demonstrate the significance of employing configurational thinking to evaluate corporate governance in relation to ESG disclosure. Our findings indicate that the connection between board characteristics and high levels of ESG disclosure varies according to bank attributes.

The Impact of Revenue Diversification on the Performance of Chinese Commercial Banks

Since the 18th National Congress of the Party, the intensity of financial reforms has been continuously increasing. Against this backdrop, the competitive environment within China's banking sector has become more challenging, leading various banks to confront a spectrum of challenges while also encountering opportunities for growth. With the advancement of marketization, numerous banks have engaged in various forms of operations. This paper employs the Generalized Method of Moments (GMM) dynamic panel model to investigate the impact of diversified operations on the performance of Chinese banks. It posits that the advantages of contemporary diversified operations have not been fully realized due to factors such as operational costs and risk exposure. Accordingly, Chinese commercial banks should devise enhanced risk management strategies, bolster oversight, foster ongoing innovation, and progressively embark on diversified operations. This approach aims to manifest the benefits of operational diversification, thus fostering improvements in banking performance.

Valuation Analysis of the Banking Industry based on DCF, P/E and EBITDA Valuation

Contemporarily, banks play a significant role in the global financial system, and by conducting valuation research on the Chinese banking sector. It is possible to determine whether the country's financial market is operating in a stable and efficient manner, whether Chinese banking stocks offer investment potential at this stage in the sector's life cycle, and other issues. This study examines the discounted future cash flow model, the P/E model, and the EBITDA valuation method on evaluation of the banking sector. The research findings lead to the conclusion that there is little chance of significant changes in the stock price of China's banking sector, that relevant stock risks for investors are minimal, and that stable dividends can be obtained annually. The industry is at a mature stage in its life cycle, therefore there are little opportunities for rapid, extensive growth. Overall, these results shed light on guiding further exploration of the valuation of China's banking industry and banking valuation methods.

China's Financial System and Economy: A Review

China's financial system has been integral to its spectacular economic growth over the past 40 years. We review the recent literature on China's financial system and its connections to the Chinese economy based on the categories of Aggregate Financing to the Real Economy (AFRE), a broad measure of the nation's yearly flow of liquidity accounting for unique features of China's financial system. While early work on China's financial system emphasizes the state-owned enterprise reform, the recent literature explores other more market-based financing channels—including shadow banking—that grew rapidly after 2010 and have become important components of AFRE. These new financing channels not only are intertwined with each other, but also, and more importantly, are often ultimately tied back to the dominant banking sector in China. Understanding the mechanisms behind these channels and their intrinsic connections is crucial to alleviate capital allocation distortion and mitigate potential systemic financial risk in China.

Does executive compensation mechanism balance performance with risk-taking? Evidence from China's banking system

PurposeIn this study, the authors demonstrate the inherent connections between bank risk-taking, performance and executive compensation in the banking sector of China by developing a theoretical model and performing empirical tests with simultaneous equation models.Design/methodology/approachThe authors construct a multi-task principal-agent model to capture agency problems in China, and the model can be extended to various cases. In empirical tests, simultaneous equation models are used to examine the theoretical predictions by eliminating endogenous concerns efficiently compared with the methods in the existing literature.FindingsThe results indicate that the regulator fails to provide bank managers with positive incentives to control risk, whereas the compensation guidance policy (2010) proposed by the CBRC alleviates this problem in China. Additionally, the authors established that shareholders reward bank managers for better and more stable performance. The authors propose the introduction of restricted stock options into the compensation design, as the existing compensation design fails to balance the performance and risk-taking of banks.Research limitations/implicationsFirst, the executive compensation structure and details in China are not available. In addition, the equity-based incentive compensation is forbidden. Therefore, this paper cannot provide more details about how the compensation structure affects bank manager behaviours. Secondly, the database consists only 25 listed commercial banks. Luckily, the assets of these banks could account for the vast majority of China's banking assets. The authors also expect that new methodologies such as machine learning and deep learning will be adopted in the research on bank risk management.Practical implicationsFirst, the regulator should optimise the compositions and payment rule of bank executive compensations. Secondly, it is advisable to adopt restricted deferred share reward or stock option compensation in due course. Thirdly, the regulator can require the banks that undertake excessive risks and troubled by moral hazard to increase the independent director proportion on the bank board according to the authors' empirical tests that higher independent proportion prevents the risk accumulations effectively. Fourthly, except for absolute compensation, the gap between executives' salary and average employee's income should be taken account.Originality/valueThis study provides a theoretical framework that incorporates the manager behaviours, executive compensation and bank regulations, and it provides empirical tests by solving endogenous concerns. Additionally, this study examines the effects of China's compensation guidelines issued in 2010. The authors believe that this study adds value to the existing literature by illustrating the compensation mechanism in China.

The Determinants of Profitability in the City Commercial Banks: Case of China

This study uses a panel data regression model to investigate how internal and external factors affect the profitability of city commercial banks in China. The research sample consists of 16 listed city commercial banks with an unbalanced dataset covering the time period within the period of 2008–2020. A panel data regression method is utilized to investigate the factors that influence the profitability of city commercial banks in China. There are several estimation methods in panel data, and the most commonly employed models are the fixed effects and random effects models. The pooled OLS model is often used for comparison for panel data regression, and the appropriate model will be determined by statistical hypothesis testing. The results show that internal explanatory variables such as bank size, capital adequacy, credit quality, and operating efficiency and external explanatory variables such as province GDP and inflation have a significant impact on the profitability of city commercial banks, while liquidity has no significant effect on the bank’s profitability. The paper contributes to the relevant literature by identifying the determinants of city commercial banks’ profitability considering the latest situation of the banking sector in China and provides practical implications from the perspective of improving bank profitability, which are important for both banking management and regulators and for the municipal and state.

COVID-19's Impact on Recruitment of China's Banking Industry and Other Financial Sectors

Under the COVID-19 the global economy experienced an unprecedented shock and shows characteristics never be seen in history, so as the financial field, especially the banking sector in China. The paper mainly focuses on exploring how the recruitment in China’s financial industry is affected by the pandemic, including the capital of various financial institutions and the recruitment number of banks. To draw a relationship between economic growth and the employment of financial institutions, this paper tries to identify whether the Phillips Curves is applicable to explain the performance of banking sector and its recruitment under COVID-19. The authors utilize data of national economy and employment in the financial industry, and by operating regression and hypothesis testing, this paper finds out the classic Phillips Curve doesn’t hold for the banking sector in China during COVID-19. Empirical and statistical evidence shows that, the simple linear relationship between inflation and employment doesn’t exist in the banking sector from 2017 to 2021.

Assessing the interconnectedness and systemic risk contagion in the Chinese banking network

PurposeIn this paper, the authors use the balance sheet data to investigate the interconnectedness and risk contagion effects in China's banking sector. They firstly study the network structure and centrality of the interbank network. Then, they investigate how and to what extent the credit shock and liquidity shock can lead to the risk propagation in the banking network.Design/methodology/approachReferring to the theoretical framework by Haldane and May (2011), this paper uses the network topology theory to analyze the contagion mechanism of credit shock and liquidity shock. Centrality measures and log-log plot are used to evaluate the interconnectedness of China's banking network.FindingsThe network topology has shown clustering effects of large banks in China's financial network. If the Industrial and Commercial Bank of China (ICBC) is in distress, the credit shock has little impact on the Chinese banking sector. However, the liquidity shock has shown more substantial effects than that of the credit shock. The discount rate and the rollover ratio play significant roles in determining the contagion effects. If the credit shock and liquidity shock coincide, the contagion effects will be amplified.Research limitations/implicationsThe results of this paper reveal the network structure of China's interbank market and the resilience of banking system to the adverse shock. The findings are valuable for regulators to make policies and supervise the systemic important banks.Originality/valueThe balance sheet data of different types of banks are used to construct a bilateral exposure matrix. Based on the matrix, this paper investigates the knock-on effects of credit shock triggered by the debt default in the interbank market, the knock-on effects of liquidity effects, which is featured by “fire sale” of bank assets, and the contagion effects of combined shocks.

Interaction between wealth management products and bank deposits: evidence from China's shadow banking

PurposeShadow banking has been evolving rapidly in China, with banks actively using wealth management products (WMPs) to evade regulatory restrictions. These products are the largest constituent of China's shadow banking sector. A large number of these products are off-balance-sheet and considered a substitute for bank deposits. China's banking sector, especially the small and medium-sized banks (SMBs), uses these products to avoid regulatory restrictions and sustainability risk in the deposit market.Design/methodology/approachThis study empirically examined how banks in China, specifically SMBs, utilize these products on a short and long-run basis to manage and control their deposit levels. This study utilized a quarterly panel dataset from 2010 to 2019 for the top 30 Chinese banks, by first implementing a Panel ARDL-PMG model. For cross-sectional dependence, this study further executed a cross-sectional augmented autoregressive distributive lag model (CS-ARDL).FindingsUnder regulations avoidance theory, the findings revealed that WMPs and deposits have a stable long-run substitute relationship. Furthermore, the WMP–Deposit substitute relationship was only significant and consistent for SMBs, but not for large four banks. The findings further revealed that the WMP–Deposit substitute relationship existed, even after the removal of the deposit rate limit imposed by the People's Bank of China (PBOC) to control the deposit rates.Research limitations/implicationsThe individual bank-issued WMPs' amount data is not available in any database. Therefore, this study utilized the number of WMPs as a proxy for China's banking sector's exposure to the wealth management business.Practical implicationsThis research helps policymakers to understand the Deposit–WMP relationship from the off-balance-sheet perspective. During the various stages of interest rate liberalization, banks were given more control to establish their deposit and loan interest rates. However, the deposit rates are still way below the WMP returns, making WMPs more competitive. This research suggests that policymakers should formulate a more balanced strategy regarding deposit rates and WMPs returns.Originality/valueThis study contributes to the existing literature on China's shadow banking by concentrating on the WMPs. This research represents one of the few studies that analyze regulatory arbitrage in terms of the WMP–Deposit relationship. Moreover, the implementation of CS-ARDL panel data models and multiple data sources makes this study's findings more reliable and significant.

Impact of internal and external CSR on organizational performance with moderating role of culture: empirical evidence from Chinese banking sector

PurposeThis study investigates the impact of corporate social responsibility (CSR) on organizational performance, especially competitive performance (CP) along with moderating role of the organizational culture (OC) from the banking sector of China. Drawing on the stakeholder theory, the first goal is to examine the relationships between CSR and organizational CP. Second, the purpose is to evaluate the moderation of OC between the relationship of CSR and CP, respectively.Design/methodology/approachSEM using SmartPLS was majorly engaged to ascertain the relationship and to inquire the assumed hypotheses. The convenience sampling was engaged to collect the data from the Chinese banking market with the help of students, colleagues and personal visits.FindingsThe findings exhibited that CSR both external and internal CSR has significant correlations on organizational CP within banking sector of China. Second, the findings revealed a positive moderation influence of OC between the relationships of CSR and organizational CP. The comprehensive analysis of each factor of CSR on organizational CP was autonomously inspected to understand the insights which ensure that how the incorporation of CSR and OC activities may improve organizational CP.Research limitations/implicationsThis study faces numerous limitations related to sample and geographic locations that assure new work possibilities for researchers across the world.Practical implicationsThis study equips insightful information for management on how organizations can obtain CP by consolidating CSR and OC activities as their more productive strategic tools. This article endows with potential theoretical and managerial implications with empirical addition to concerned literature of OC, CSR and organizational CP.Social implicationsUnderstanding OC and CSR activities can provide interesting and helpful insights for the personnel to perform well within the banking institutes.Originality/valueThe topic of CSR and culture has been known as the evolving concept that is getting strong concern for the researchers. The additional work particularly empirical is yet required to explore the insights on CSR and OC themes worldwide, especially in developing nations.