A spatial production analysis of Chinese regional banks: case of urban commercial banks

Urban commercial banks are regional banks which have gained tremendous importance in the last two decades in China. There is, however, a lack of research on regional banking, especially on the Chinese regional banking industry. Therefore, using an innovative spatial approach, this paper investigates the efficiency of 65 Chinese urban commercial banks across 26 regions during 2013 to 2017. A Key finding for our sample is the significant spatial dependence of loans of Chinese urban commercial banks with their neighbouring regions’ banks. Short-run efficiency is increasing during the research period. For regions with less than three urban commercial banks, the average efficiencies are stable and relatively high. However, regions with more banks have both the highest and lowest efficient banks existing at same time. These interesting results fit with the development process of Chinese urban commercial banking, which the market restructure has contributed to banks’ efficiency