Chinese Banks Research Articles

The Development of Overseas Corporate Culture of Chinese Bank in the Qing Dynasty: A Case Study of Heshengyuan

The Heshengyuan (合盛元) Bank is a paradigmatic example of the Shanxi merchants (晋商) during the Qing Dynasty. Established in the early 19th century, the bank actively expands its domestic operations and takes the initiative to extend its services eastward. It establishes branches and subsidiaries in Korea and Japan, engaging in financial transactions. During its overseas expansion, the firm develops an innovative corporate culture that includes the following elements: a proactive approach to business expansion and the exploration of international financial territories; an astute awareness of customer demands, with a business strategy oriented towards market needs; and a policy of prioritizing the employment of young executives and the hiring of expatriate personnel. These culturally open and progressive corporate values facilitate Heshengyuan’s significant commercial influence within the East Asian region and bequeath a legacy of corporate ethos that serves as a valuable reference for subsequent generations.

A novel ranking method in data envelopment analysis: a real case on Chinese banking industry

Purpose This study aims to address the lack of discrimination between fully efficient decision-making units in nonparametric efficiency analysis models by introducing a new ranking technique that incorporates contextual variables. Design/methodology/approach The proposed method combines Data Envelopment Analysis (DEA) and Ordinary Least Squares (OLS). First, DEA evaluates the partial efficiency of each unit, considering all inputs and only one output. Next, OLS removes the influence of contextual variables on the partial efficiencies. Finally, a ranking criterion based on modified partial efficiencies is formulated. The method is applied to data from 100 Chinese banks, including state-owned, commercial and industrial institutions, for the year 2020. Findings The ranking results show that the top six positions are assigned to highly esteemed banks in China, demonstrating strong alignment with real-world performance. The method provides a comprehensive ranking of all units, including nonextreme efficient ones, without excluding any. It resolves infeasibility issues that arise during the ranking of efficient units and ensures uniqueness in efficiency scores, leading to a more reliable and robust ranking process. Contextual variables exerted a greater influence on the first partial efficiency compared to the second. Notably, Total Capital Adequacy (TCA) significantly impact bank efficiency. Originality/value This study introduces a novel ranking method that effectively integrates contextual variables into DEA-based efficiency analysis, addressing limitations of existing methods. The practical application to Chinese banks demonstrates its utility and relevance.

Relationship lending and the role of loan officers in China: Empirical analysis based on the data on companies in industrial clusters

Relationship lending refers to lending behavior in which a financial institution makes loan decisions based on the accumulated soft information on the borrower. Empirical studies have revealed the positive effect of relationship lending. However, questions concerning who generates and accumulates soft information and in what ways in China have never been analyzed empirically. This paper empirically aims to explain whether loan officers generate soft information in relationship lending using data collected through surveys conducted among SMEs in the apparel industry clusters in Zhejiang and Jiangsu provinces. Based on the results of this study, relationship banking in China, which deals with the role of loan officers, seems even more important than is generally recognized.

Co-evolutionary decoupling in EMNEs’ internationalisation: A Chinese bank's journey of drifting apart from the US-led global financial system

We develop a co-evolutionary decoupling model to explain the decoupling process and its contributors, based on a Chinese bank's dynamic interdependency with the US-led global financial system. This decoupling is the joint outcome of the firm's strategic adaptations in response to economic, institutional, and geopolitical environmental challenges. By incorporating co-evolution and international relations perspectives into international business research, we reveal how and when non-economic environmental factors can decisively hinder a firm's, especially an EMNE's, internationalisation. This study provides new firm-level evidence on the ongoing Sino-US decoupling process, extending our understanding of international business through co-evolution and international relations perspectives.

Implementing the “Belt and Road” Initiative in Central Asia in a Pandemic: A Regional Risk Assessment

The relevance of the study stems from the need to assess the impact of the “Belt and Road” Initiative on the economic and political situation of the Central Asian states. In this context, article aims to identify features of the Central Asian states that may, in the process of deepening regional cooperation with the People’s Republic of China, lead to a dependency on it. The following research methods were also used: qualitative and quantitative analysis of scientific sources and documents, analysis of statistical data, discourse analysis, intents analysis, comparative analysis, method of synthesis, deduction. The article presents the results of the survey, revealing not only the strengthening of China’s economic influence in the region, but also, according to some experts, the increasing political influence that is reflected in the public and political discourse of the region’s countries and entails an increase in anti-Chinese sentiment in the form of debt obligations of Central Asian states to Chinese banks, revealing that the coronavirus pandemic and the ensuing economic crisis showed the need to find new ways of economic development. It justifies the importance of building a new cooperation strategy that could maintain a certain balance between the world centers of power – China, the United States and Russia, taking into account the interface between the Eurasian Economic Union project and the “Belt and Road” Initiative. The articles are of practical value in terms of a current expert assessment of the “Belt and Road” Initiative’s impact on the geopolitical and geo-economic situation during COVID-19.

Digital economy and entrusted loans: Evidence from shadow banking

Entrusted loans represent a vital component of shadow banking in China and have significant implications for financial system stability. Taking advantage of a sample covering all A-share traded Chinese firms from 2013 to 2022, this research explores the impact of the digital economy on entrusted loans. We display that the level of the digital economy reduces the scale of entrusted loans by strengthening bank risk management and increasing corporate financing options. Further analysis shows that banking competition can amplify the negative link we found. Overall, this study advances extant literature on the digital economy and shadow banking.

A Study on the Construction of Environmental Image of Four Chinese Banks: Based on Metadiscourse Analysis

With the escalating global concern for environmental issues and China's commitment to achieving carbon peaking and neutrality goals, this study aims to investigate how four leading Chinese banks have constructed environmental images through their CSR reports from 2016 to 2021. Utilizing Hyland's (2005) Metadiscourse model and AntConc 3.5.9 for corpus analysis, we quantitatively and qualitatively examine the strategic use of Metadiscourse in these reports. Our findings reveal a dominance of interactive Metadiscourse, particularly transitions and frame markers, which facilitate coherent and structured environmental disclosures. Interactional Metadiscourse, featuring self-mentions and engagement markers etc., underscores the banks' authority and reader engagement. The banks' CSR reports demonstrate commitments to carbon reduction, green finance and credit, ecological agriculture support, and environmental risk management, and then portray proactive environmental images. This research provides insights into how Metadiscourse constructs sustainability discourse in the financial sector, informing ESG reporting and environmental communication strategies.

The Impact of Inflation on Commercial Banks in China

Abstract: Inflation is an important issue that affects the profitability and operational stability of commercial banks. Conducting an in-depth analysis of these influences while putting forward effective countermeasures can be beneficial to ensuring the stable operation of commercial banks. This paper focuses on the period from 1937 to 1949 where the Second Sino-Japanese War and the Chinese Civil War, which had contributed to severe inflation and disrupted the banking sector, and the formation of the modern Chinese banking system. This study critically examines the main causes behind inflation, evaluates their implications on the functioning of commercial banks. It also assesses both the positive and negative impacts on commercial banks, pointing out the challenges commercial banks face during different periods. For example, the market turmoil and policy changes in the 1940s have made it difficult for commercial banks to retain normal operation; therefore are suffering from making profits and inflation has made the situation even worse. In addition, this paper provides short-run and long-run strategies for reducing the negative effects of inflation, with consideration of Chinas unique economic structure and historical context. By integrating insights from historical and contemporary perspectives, this analysis aims to offer valuable views on the micro and macro impacts inflation could bring.

Forecasting Bank Default Risk with Interpretable Machine Learning: The Study of Chinese Banks

ABSTRACT Bank occupies an important position in the financial system. The stable operation of the banking industry is not only one of the important factors in achieving sustainable economic growth but also related to the stability of the entire financial system. This research collects data from 507 banks in China from 2000 to 2021, uses the non-performing loan ratio as the measurement indicator of bank risk, and selects indicators from five levels (macroeconomic environment, industry economic environment, economic policy uncertainty, financial openness and bank financial status) On this basis, we use interpretable machine learning models to predict the bank’s default risk, analyze and compare the interpretable machine learning model and the post-hoc explainable methods. The results indicate that Provision Coverage (PC), Loan Provision Coverage (LPC), Liquidity Ratio (LR), and KOF Financial Globalization Index (KOFFiGI) have strong predictive capability for bank default risk. Our research can provide a reference for banks, government and financial regulatory authorities to construct the prediction model and indicator monitoring platform for bank default risk.

Stress testing climate risk: A network-based analysis of the Chinese banking system

Assessing the impact of climate risks on the financial system is one of the most urgent issues currently. We build a network-based climate risk model to explain how a shock from climate policies translates into shocks in the banking system. Then, we conduct macroprudential stress tests on the Chinese banking system under various climate policy scenarios. We show that under the policy target of peaking the carbon in 2030 and CO2 concentration no more than 500 ppm in 2100, individual banks in China will face equity losses ranging from 1.93% to 14.03%, equivalent to an overall loss of 6.94% in 2025. When considering the electric power sector's adoption of green energy technologies, the adverse effects will be slightly mitigated. Our stress tests suggest that the implementation of climate policies should be gradual and consider potential economic impacts so that climate goals can be achieved without undue shocks to the economy.

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.

Fiscal Stimulus, Deposit Competition, and the Rise of Shadow Banking: Evidence from China

The rise of shadow banking and attendant financial fragility in China can be traced to intensified deposit competition following the 2008–2009 global financial crisis (GFC). A large, state-owned bank’s deposits from cross-border money inflows fell significantly following the GFC, and it supported the government’s fiscal stimulus more aggressively than other large banks by issuing larger volumes of new loans. Small and medium-sized banks with more branch-level overlaps with this large bank relied more on shadow banking and issued more wealth management products (WMPs)—short-maturity, off-balance-sheet substitutes for deposits. Greater amounts of WMPs created rollover risks for the issuers, as reflected by higher yields on new WMPs, higher borrowing rates in the interbank market, and lower stock-market performance during liquidity stress. This paper was accepted by Victoria Ivashina, finance. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71272024, 71972051, and 72071117]. Supplemental Material: The internet appendix and data files are available at https://doi.org/10.1287/mnsc.2023.04233 .

Role of environmental, social, and governance (ESG) investment and natural capital stocks in achieving net-zero carbon emission

This study investigates the role of environmental, social, and governance (ESG) investment and natural capital stocks in achieving net-zero carbon emissions, focusing on the Chinese economy. This study uses the data from 2013 to 2022 and applies correlation analysis, quantile process estimation, quantile-factor augmented vector autoregressive, quantile dimension regression, and robustness analysis techniques. The results confirmed that ESG investment has a significant role in net-zero carbon emission and fosters natural capital stocks in the Chinese ecosystem. The results further established that natural capital stocks significantly benefit the Chinese ecosystem and reduce greenhouse gas emissions, CO2 emission – gaseous fuel, CO2 emission – solid fuel, and carbon intensity. Moreover, natural capital stocks have a significant role in achieving net-zero carbon emissions and it accelerates gross tree cover and green agricultural yield. The study is of great interest to corporations, Chinese banks, and the government in planning and achieving net-zero carbon emissions as per Prudential Financial regulation and accounting reporting systems. Achieving net-zero carbon emission is a process-based approach; therefore, the study recommends that policymakers customize investment mechanisms and natural capital accounting standards as per the territorial requirements and execute an ecological control system to make it sustainable.

The multilevel determinants of overlapping membership on board committees: Evidence from Chinese banks

This study manually collects data on 4090 board committee members from 36 listed banks in 11 regions of China from 2007 to 2020, uses a hierarchical linear model, and integrates institutional and resource dependence theories to examine the multilevel determinants of overlapping membership on board committees. The results show that low legalization and the absence of chief risk officers promote overlapping membership on board committees. Directors who have financial expertise, are shorter-tenured, and do not have social relationships with senior leaders sit on more board committees. Further analysis shows that information and resource needs are more likely to drive overlapping membership on board monitoring committees, and independent directors with lower information acquisition costs sit on more board committees. The moderating analysis between multilevel factors shows that legalization and the presence of chief risk officers substitute for, while religion and board interlocks complement director-level information and resource needs.

To What Extent Did the Chinese Banking Industry Affect Chinas Economic Growth in Past 50 Years?

Currently, the Chinese economy is encountering a period of stagnation in its development. Sustaining the rapid growth rate of the economy has become a challenge, as there is a lack of adequate momentum for continuous high-speed advancement. The nation is edging closer to the middle-income trap, and the conventional approach of relying on investment, exports, and consumption to propel economic growth is proving to be unattainable. It must be achieved through the transformation of economic structure, and the transformation of the financial industry is the most important part of it. The research question of this article is how commercial banks affect economic growth and how China's banking system has developed. The WTO's entrance into China has been a major catalyst for the banking industry and its system to be built. The literature review section delved deeply into economic growth, examining the concept of it, how it is achieved in China, as well as any factors that may influence it. More importantly, the study reviewed what the banking industry is and the development stages of China's banking industry. The banking industry's development was examined in the concluding part of the literature review, examining pertinent studies on the effect of economic expansion. In the discussion section of the research, we analyzed how the banking industry affects economic growth through its impact on capital allocation, banking services, and currency. Ultimately, we drew corresponding conclusions and proposed countermeasures and suggestions for the future development of the banking industry. Due to the fact that the industrial structure of developing countries is usually dominated by labor-intensive industries, clarifying the interrelationship between China's banking structure, capital allocation efficiency, and economic growth has universal significance and reference value for relevant financial arrangements in developing countries.

Governance structure, organizational form, and business performance: A study of the Shanxi piaohao (banks), 1820s–1930s

This paper studies Shanxi piaohao, China’s first and largest private remittance banking group, established by a group of merchants from Shanxi province. Drawing on extensive primary sources, our study offers the first empirical analysis of the piaohao’s business organisation and performance. We show that piaohao thrived but were also constrained by their own private rules. In their earlier development, they successfully overcame the commitment problem by implementing a townsmen-guarantor-based recruitment system, a centralised M-form structure, and a multilateral punishment mechanism. To align the interests of shareholders and employees, they created employment shareholders and offered a competitive compensation scheme. However, piaohao’s governance structure became obsolete as shareholders increasingly failed to monitor head managers in the later period. A drastic increase in business volume and a changing business climate also exposed the defects of a centralised structure. As modern Chinese banks rose to prominence, the piaohao were gradually outcompeted and declined.

Современная банковская система Китайской Народной Республики

Cooperation with banks of the People’s Republic of China (hereinafter referred to as China, the PRC) becomes a crucial component for successful development of large and small business in Russia. The Chinese banking system has proven its efficiency as an important development institution of one of the world’s leading powers. This experience may be in great demand in the Russian reality. Besides, the situation in the Russian-Chinese financial and banking logistics proves relevance of using experience of the PRC in the development of the national banking system. The authors emphasize special aspects of the banking system of the PRC that characterize its levels, the system of laws that govern banking activities and the current status taking into account the development of banking relations between Russia and China against the background of escalation of Chinese-American relations, U.S. sanctions.

Chinese Banks and Their EMDE Borrowers: Have Their Relationships Changed in Times of Geoeconomic Fragmentation?

Chinese Banks and Their EMDE Borrowers: Have Their Relationships Changed in Times of Geoeconomic Fragmentation?

Digital transformation, information and lending distance -Evidence from Chinese bank branch data

This research aims to empirically investigate the relationship between bank digital transformation and lending distance. In traditional financial geography theory, banks have a natural geographical proximity preference in their credit decision-making, which might lead to suboptimal credit allocation. Can the rapid development of digitalization improve the situation that banks are only capable of undertaking ex ante due diligence and ex post monitoring of proximate borrowers, given that fintech has greatly improved the overall efficiency of the financial industry? Using bank loan data of listed enterprises in China from 2013 to 2021, this paper finds that the digital transformation of banks can significantly extend the lending distance between banks and enterprises. The moderating effect analysis suggests that distance extending effect of bank digitalization is more pronounced for firms with poor information quality and in competitive banking sector. Further, digital transformation extends the lending distance without increasing risk preferences, as evidenced by the empirical finding that the non-performing loan ratio remains unaffected by the increased distance. Also, geographical expansion in lending distance reduces loan concentration. The research in this paper supports the conclusion that banks' digital transformation positively impacts corporate credit allocation and is beneficial to achieving financial stability by improving loan performances.

How does carbon trading price matter for bank loans? Evidence from Chinese banking sector

This paper investigates the impact of carbon trading prices on Chinese commercial banks. We propose a stress test model to calculate the decline of firms’ liabilities and the climate-driven loss of commercial banks to different industries. The results indicate that State-Owned Banks suffer the highest climate-driven loss among all types of banks. City commercial banks suffer the highest climate-driven loss ratio since they maintain a relatively low level of Tier 1 core capital. Beijing, Shanghai, Jiangsu, and Zhejiang maintain the highest levels of climate-driven loss ratio. Furthermore, the allocation of loans portfolio across different industries also influences climate-driven loss of banks. The climate-driven loss to the electric power, heat, gas, and water production and supply sector is the largest in all industries. It is necessary for banks to incorporate climate factors into the risk assessment framework.