What precludes the development of noninterest activities in Chinese commercial banks from the perspective of the price of interest activities?

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Abstract:

Noninterest activities of Chinese commercial banks remain sluggish. This article examines the price of interest activities and noninterest activities of Chinese commercial banks over 2000–2010 based on OLS and 2SLS regression. We find that the price of interest activities has a significant negative effect on the noninterest activities. It appears that controlled interest rate is the main hindrance of the development of noninterest activities, and the result is consistent with ‘political’ view. We also find that among state-owned commercial banks and nonstate-owned ones, the relationships of interest activities and noninterest activities are differential. The link between the price of interest activities and noninterest activities in state-owned commercial banks is stronger than that in nonstate-owned commercial banks. That is the result of different government intervention degree.

Keywords: China; G21; G28; G38; commercial bank; noninterest activities; price of interest activities

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2014.881971

Affiliations: 1: School of Economics and Finance, Xi’an Jiaotong University, Xi’an, SN, 710061, China 2: School of Management, Xi’an Jiaotong University, Xi’an, SN, 710049, China

Publication date: July 23, 2014

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