Bank profitability and GDP growth in China: A note

Yong Tan, Christos Floros

    Research output: Contribution to journalArticlepeer-review


    This article examines the effect of GDP growth on bank profitability in China over the period 2003-2009. The one-step system GMM estimator is used to test the persistence of profitability in the Chinese banking industry. The empirical findings suggest that cost efficiency is positively related to bank profitability, while lower profitability can also be explained by higher taxes paid by banks. In addition, there is a negative relationship between GDP growth and bank profitability. Furthermore, the results show that (1) the profitability in the Chinese banking industry is significantly affected by the level of non-performing loans, and (2) Chinese banks with higher levels of capital have lower profitability. Finally, we find that the departure from a perfectly competitive market structure in the Chinese banking industry is relatively small.

    Original languageEnglish
    Pages (from-to)267-273
    Number of pages7
    JournalJournal of Chinese Economic and Business Studies
    Issue number3
    Publication statusPublished - Aug 2012


    • bank profitability
    • China
    • GDP
    • GMM


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