Chinese Commercial Banks Research Articles

Does digital transformation enhance bank soundness? Evidence from Chinese commercial banks

Does digital transformation enhance bank soundness? Evidence from Chinese commercial banks

The Impact of the Epidemic on Risk-Taking in Commercial Banks

The outbreak of the COVID-19 epidemic in 2020 significantly impacted various industries and the overall economy, with China’s GDP showing negative growth in the first quarter of that year, threatening the banking sector. Despite the limited direct effect on the scale of lending by Chinese commercial banks, non-performing loans experienced a significant increase. This study examines the influence of the epidemic on commercial banks’ risk-taking behavior. It finds that the epidemic enhances risk-taking by increasing economic losses, directly through financial losses and indirectly through rising business risks, reduced profitability, and changes in enterprise cash reserves. Moreover, the study highlights that insurance protection and bank risk management are moderating, with stronger protections weakening the impact on risk-taking. Additionally, the heterogeneity of local banks reveals that those serving rural areas experience greater risk-taking impacts than banks focused on urban industrial and commercial groups.

The Impact of Non-Interest Income on Bank Risk in Chinese Commercial Banks

In the rapidly evolving economic landscape of Chinese commercial banks, the diversification of revenue streams beyond traditional interest income has emerged as a critical trend. Traditionally reliant on interest-based revenue, these institutions are increasingly focusing on non-interest income due to intensified market competition and the liberalization of interest rates. This study aims to investigate the impact of non-interest income on the risk profiles of Chinese commercial banks, a relationship that has been subject to both supportive and critical academic perspectives in recent research. This research employs a panel data econometric model analyzing data from thirteen publicly-listed Chinese commercial banks from 2015 to 2022. The paper explored variables such as non-interest income proportion, bank diversification index, and several risk measures like risk-adjusted return and the Z-Score for bankruptcy risk. Key findings indicate a complex relationship where non-interest income generally reduces bankruptcy risk and enhances risk-adjusted returns. Conversely, income diversification shows mixed effects; it appears to reduce risk in some metrics while potentially increasing it in others. The study concludes that while non-interest income plays a beneficial role in mitigating overall banking risk, the effects of diversification are nuanced and call for careful risk management. Banks are advised to balance their income streams and ensure that expansions into new non-interest income avenues align with their risk management capabilities. These insights contribute to strategic financial management within the evolving Chinese banking sector.

Analyzing the Impact of Green Finance Development on the Transformation of Commercial Banks from an ESG Perspective

As a major global economy, China actively participates in international environmental protection and climate change cooperation, having signed the Paris Agreement and committed to reducing carbon emissions. Additionally, China promotes green investment and financing domestically and internationally to fulfill its environmental commitments. Within this international context, the financial industry is increasingly transitioning towards green finance, significantly impacting the operational models and strategic decisions of commercial banks. This paper employs a literature review methodology to analyze the impact of green finance on the transformation performance of commercial banks in China from an Environmental, Social, and Governance (ESG) perspective. It examines the correlation between ESG standards and the transformation of commercial banks, discusses relevant policies for the transformation of Chinese commercial banks, identifies existing deficiencies, and explores future research directions and development prospects for green finance. The paper concludes that green finance positively affects the operational performance of commercial banks. Firstly, it channels social capital towards green and low-carbon projects while restricting investments in high-pollution and high-emission sectors, thereby promoting industrial upgrades. Secondly, green finance emphasizes environmental protection, social responsibility, and good governance, fostering economic development and addressing resource scarcity, which contributes to achieving carbon peaking and carbon neutrality. Thirdly, within the ESG framework, green finance offers investors more strategic options, enriches the product portfolio of banks, and expands economic growth points. Finally, it provides a reference for the government to formulate and improve green finance policies, encourages banks to broaden their business scope, and promotes policy implementation.

Research on Precision Marketing Strategies of Chinese Commercial Banks under the Background of Internet Finance

With the rapid rise of Internet finance, China's commercial banks are entering a new era full of challenges and opportunities. This paper makes an in-depth analysis of the current market environment of commercial banks, and systematically evaluates the core advantages, weaknesses to be solved, potential development opportunities and severe threats of banks in the context of Internet finance with the help of a comprehensive SWOT analysis. Based on the detailed analysis results, this paper further introduced the 4p marketing framework and created a series of targeted and effective marketing strategies for commercial banks. In terms of pricing strategy, banks need to implement more flexible pricing models to stabilize and enhance their competitive position in the fierce market competition. At the distribution level, it is necessary to integrate online and offline channel resources and strive to create a seamless omni-channel service network. As for promotion, it is recommended to vigorously promote data-driven precision marketing strategies, and strive to improve customer experience at the same time, but also effectively enhance the brand's market awareness and influence.

Analysis of the Current Situation of Liquidity Risk Management in China's Commercial Banks and the Proposed Countermeasures

This paper discusses in depth the importance of liquidity risk management in commercial banks and the challenges it faces at a time of accelerated global economic integration. Financial globalization not only brings unprecedented development opportunities for the banking industry, but also exposes it to more complex and volatile liquidity risks. As an important part of the financial system, the sound operation of commercial banks is crucial for maintaining financial stability and healthy economic development. The article focuses on the current situation of liquidity risk management in Chinese commercial banks and reveals the core issues of weakening deposit base and loan expansion aggravating liquidity pressure through detailed analysis. Subsequently, a combination of literature review and case studies is used to analyze the dual impact of macroeconomic fluctuations and micro-management deficiencies on liquidity risk. Ultimately, the study concludes by emphasizing the key roles of the improvement of the government regulatory system and fintech in optimizing the asset and liability structure of banks and enhancing the efficacy of risk management, which together safeguard the sound operation of the financial system and the sustained and healthy development of the economy.

An Empirical Analysis of Non-Interest Income's Effect on Commercial Bank Performance

The share of non-interest income in commercial banks' operating revenue has steadily risen, dramatically affecting their overall operational performance. Using panel data for sixteen Chinese listed commercial banks from 2007 to 2013, variable intercept and variable coefficient models were constructed, accounting for variables including macroeconomic growth rate. The impact of non-interest revenue on the performance of commercial banks was empirically investigated, together with the quantity of bank assets and the cost-to-income ratio. The study results indicate a sizeable negative association with operational costs and a substantial positive correlation with total bank assets, macroeconomic growth, and commercial bank performance. However, the effect of non-interest income on performance differs depending on the kind of commercial bank. Central state-owned commercial banks' non-interest revenue and performance are favorably correlated; nevertheless, urban commercial banks' non-interest revenue and performance are negatively correlated. Therefore, it is recommended that Chinese commercial banks formulate differentiated development strategies based on their characteristics to enhance overall profitability.

Economic policy uncertainty and bank stability: the role of digitalization level

ABSTRACT This paper employs quarterly data from 102 Chinese commercial banks spanning from 2017Q1 to 2021Q3. Utilizing a panel fixed-effects model, we scrutinize the impact of digitization on the relationship between economic policy uncertainty and the stability of commercial banks. The main research conclusion is that a higher level of digitization can alleviate the negative effects of economic policy uncertainty on the stability of commercial banks. Further research indicates that digitization achieves this effect by improving borrower selection, reducing the cost of risk management, and enhancing profitability. The mitigating effect of digitization varies across different types of commercial banks, different time periods, and different external environments, with a stronger impact observed on state-owned banks, banks in the post-pandemic period, and banks operating in high external pressure environments. Our research results demonstrate for the first time how digitization enhances banks’ resilience to the impact of economic policy uncertainty, providing insights for financial stability and development.

The Impact of Green Finance on Profitability of Commercial Banks: An Empirical Analysis from Chinese Commercial Banks

The Impact of Green Finance on Profitability of Commercial Banks: An Empirical Analysis from Chinese Commercial Banks

How does news-driven monetary policy frictions affect nonperforming loans?--Taking Chinese commercial banks as an example

How does news-driven monetary policy frictions affect nonperforming loans?--Taking Chinese commercial banks as an example

Assessing China’s bank risk-taking: a study from the microeconomic and macroeconomic perspectives

On the basis of the unbalanced panel financial data of Chinese commercial banks from 2007–2021, this paper first conducts an identification test of the bank risk-taking channel for China’s monetary policy transmission. Then, it tests the impact of bank microcharacteristics and macroeconomic fluctuations on bank risk-taking in monetary policy transmission. The empirical results reveal the presence of the risk-taking channel for China’s monetary policy transmission. China’s bank risk-taking in monetary policy transmission is asymmetric because of the heterogeneity of bank microcharacteristics and macroeconomic fluctuations; i.e., the larger the asset size is, the greater the capital adequacy ratio is, the greater the return on net assets is, the greater the risk-taking level is, and the lower the risk-taking level of banks with poorer liquidity and higher branch coverage is. The impact of macroeconomic fluctuations is reflected in the fact that the higher the economic growth rate is, the greater the risk-taking level of banks. Therefore, it is necessary to enhance the transparency of monetary policy, strengthen the supervision of commercial banks, stabilize the macroeconomic environment, match the risk-taking level of banks with monetary credit and economic growth, and improve the effect of monetary policy transmission.

Inclusive FinTech, open banking, and bank performance: evidence from China

Open banking is an emerging business model that is representative of FinTech. To explore whether inclusive FinTech can improve bank performance and identify the underlying mechanisms by which this occurs, we investigate a sample of Chinese commercial banks involved in open banking during 2011–2020. The results show that inclusive FinTech can improve bank performance by improving the bank’s lending rate and liability structure, and that this positive effect is more pronounced in national and rural banks. The results indicate that inclusive FinTech has the greatest impact among banks serving the largest population and those who are excluded from the traditional financial system, and that financial inclusion does not detract from bank performance. However, the results do not provide evidence that inclusive FinTech improves bank performance by reducing risk-taking, suggesting a greater need for inclusive FinTech to focus on risk management. This study adds empirical evidence regarding the role of inclusive FinTech in banks. To promote inclusive FinTech and bank performance, developing economies like China should strengthen digital financial innovations, focus on risk management, and promote cooperation under the open finance framework.

Evolution of financial intermediation and performance consequences in China’s commercial banks

PurposeThis study evaluates the evolution from traditional to nontraditional financial intermediation (NTFI) in Chinese commercial banks from 2006 to 2021, analysing its impact on bank performance and risk.Design/methodology/approachAccounting measures are used to construct granular activity data, and factor analysis is employed to develop a financial intermediation evolution (FIE) index. The fully modified OLS (FMOLs) estimator is used for nonstationary data analysis, and difference-in-differences (DID) analysis is used for robustness check.FindingsChinese banks exhibit unique evolution in financial intermediation compared to developed economies, with greater inter-bank variations over time than intra-bank differences. From 2006 to 2017, three paths were identified: Investment, Fee and Repo models, with a fourth path (the Investment2 model) emerging post-2017. Only the Repo model enhances bank returns (ROA & ROE), while shifts towards NTFI increase liquidity and leverage risks across all models. The evolution of bank business models and their consequent implications on performance and risks are influenced by regulatory objectives and banks’ endeavours in regulatory arbitrage.Practical implicationsMajor stakeholders in the banking sector can gain a better understanding of financial intermediation and associated market behaviour, performance and risks, with significant implications for banking regulations and crisis management.Originality/valueThis study provides the first comprehensive overview of the evolution of Chinese commercial banks’ financial intermediation activities over an extended period, uncovering the unique characteristics distinct from the developed economies.

Study on the New Path of Chinese Commercial Banks' Globalization Development

The globalization process of Chinese commercial banks stands at a significant historical juncture. With the increasing integration of global financial markets, China's economic power is progressively infiltrating the international arena. As vital agents of economic development, commercial banks must adapt to this trend and accelerate their internationalization efforts. However, amid the wave of globalization, Chinese commercial banks face unprecedented challenges and opportunities. On one hand, the intensifying competition in global markets and the growing complexity and uncertainty of the international financial system necessitate higher-level strategic planning. On the other hand, the rapid advancement of technology and the rise of the digital economy offer new avenues for development. Identifying an appropriate strategic position globally and achieving sustainable business growth has become a pressing issue for Chinese commercial banks. This study focuses on exploring how Chinese commercial banks can navigate the globalization process through innovative strategies, regional differentiation approaches, and multinational collaboration to find new paths that adapt to the global market, thereby securing a competitive edge in the international arena.

How does macroprudential policy affect the relationship between financial openness and bank risk-taking

This paper investigates how macroprudential policy affects the relationship between financial openness and bank risk-taking by utilizing Chinese commercial banking data from 2005 to 2021. We find that financial openness generally promotes bank risk-taking. Robustness checks consistently support this finding, including variable substitutions, sample period adjustments, controlling for other shocks, and endogeneity concerns. The impact of financial openness on risk-taking demonstrates potential heterogeneity, contingent upon factors such as bank financing constraints, risk management, and financial regulation. We delineate credit, interest rate, and asset price channels through which financial openness affects bank risk-taking, notably by amplifying bank credit volumes, diminishing credit asset ratios, compressing net interest margins and spreads, and elevating asset prices. Macroprudential policies are identified as effective countermeasures against the heightened bank risk-taking associated with financial openness, with the effectiveness of these policies varying by the specific regulatory instruments.

ESG performance and green innovation in commercial banks: Evidence from China.

Environmental, Social, and Governance (ESG) is closely related to commercial banks' promotion of "dual-carbon" goals and the concept of sustainable development. The impact of ESG performance on commercial banks' support for green innovation remains an issue for in-depth study. This paper studies 36 Chinese commercial banks in China from 2010 to 2021 and finds that the ESG performance of commercial banks can promote green innovation, and this promotion is more obvious when bank remuneration incentives are effective. Meanwhile, this paper verifies the mediating role of the non-performing loan ratio and the Lerner index in it, which provides channel support for ESG to effectively promote green innovation development. This study enriches the existing literature on environmental, social, and governance performance and green innovation in commercial banks and provides new perspectives and directions for future research.

Will fighting climate change affect commercial banks? A carbon tax policy simulation

Policies implemented to address climate change, especially carbon tax policies, have profound impacts on risk management and credit losses in the financial system. Existing research suggests that climate risks may lead to high‑carbon-emission companies facing asset stranding and credit downgrades; however, their specific effects on credit losses in the banking system have not been thoroughly elucidated. This study uses data from 21 listed Chinese commercial banks and 3163 firms for 2020, applying climate stress-testing to construct 16 carbon tax scenarios. These scenarios simulate the effects of a carbon tax on firms' asset values and financial stability and estimate the potential transmission of these effects to credit losses in Chinese commercial banks. Our findings reveal that introducing a carbon tax significantly increases bank credit losses, with credit losses escalating exponentially as tax rates increase. State-owned commercial banks experience the highest losses, followed by joint-stock and city banks. The primary contributors to these credit losses are high‑carbon industries such as electricity, manufacturing, and transportation. These findings underscore how carbon tax policies can decrease firms' asset values and thereby increase banks' credit risks, providing essential insights for policymakers designing climate policies.

Sunshine and bank lending

This study uses a unique proprietary loan-level dataset from a state-owned Chinese commercial bank to examine how sunshine-induced emotions influence loan pricing decisions made by high-level loan officers who would be punished for loan defaults. Our findings reveal that an increased intensity of sunshine at loan officers' workplace can increase loan pricing for borrowers. The result can be explained by the mood channel: sunshine induces a positive mood among loan officers leading to greater risk aversion in their loan pricing decisions, known as the mood maintenance effect. This effect is magnified for firms with high risk, high bank–firm information asymmetry, and in locations characterized by less bank competition. Our main results are still valid after taking into account various robustness issues and endogeneity concerns.

The impact of fintech on the profitability of Chinese commercial banks

This study assesses the transformative impact of financial technology (fintech) on the profitability of Chinese commercial banks, with a focus on addressing the challenge of endogeneity in financial data analysis. The study uses the systematic generalized method of moments (GMM) to compare the results with those from fixed-effects models in order to make the findings more reliable. The results reveal that fintech significantly impacts bank profitability, predominantly in a negative manner. This underscores the pressing need for banks to adapt and innovate, responding proactively to the fintech disruption. The practical implications of this study suggest that banks should not only invest in research and development within fintech but also tailor strategic responses according to bank types and establish a comprehensive financial services ecosystem to bolster their competitive edge and profitability. The findings are critical for bank executives and policymakers aiming to navigate the challenges posed by fintech innovations.

Nexus between green credit efficiency and strategic, business and management digital transformation–based on 114 commercial banks in China

With the expansion of green finance and the digital economy, the discussion on the evolution of green credit business and the digitalization of commercial banks have grown in prominence. However, limited research has been done on how different degrees of digital transformation in commercial banks—the main issuers—affect the way of green credit efficiency. To fill this gap, based on data from 114 Chinese commercial banks between 2010 and 2021, this paper explores the impact of digitalization on the green credit efficiency through the integration of several methodologies. The paper indicates that enhancing the digitalization, business digitization, and management digitization of commercial banks can greatly enhance the effectiveness of green credit businesses, but the impact of strategic digitization is not significant. Further analysis reveals that digitization facilitates the expansion of overall bank assets, thereby bolstering the green credit business. It also investigates the characteristics of commercial banks and the geographical distribution of their headquarters, indicating a diminished promotional impact for urban and rural banks, as well as banks in the central areas. Finally, this study contends that commercial banks ought to leverage digital resources extensively to facilitate digital transformation and bolster the advancement of green credit operations. It is also recommended that the government should implement preferential policies for regions and banks exhibiting slower developmental progress.