Will Trump make China’s banks more efficient? - Comment & Profiles -

Chinese banks dominate The Banker's Top 1000 ranking. But could a more open Chinese market change this?

China’s banks dominate The Banker's 2019 ranking of the Top 1000 World Banks. They hold the top four positions in the table; as a group they make the highest profits of any country; and individually they hold first, second, fourth and sixth positions in a global ranking of the top 10 banks by profits. 

But where they look less favourable, up against American banks, is in terms of efficiency. For whereas US banks make 23% of global profits with 13% of global assets, Chinese banks account for 28% of profits using 24% of assets.

US banks' return on assets is 1.24% compared with China’s 0.89%, and US banks' return on capital is 14.5% compared with China’s 12%.

Clearly if you operate in a private sector market as competitive as the US's there are pressures to become efficient that are not present in a market such as China’s, which has a heavy state presence.

But what is US president Donald Trump trying to achieve with his trade war with China? Isn't he trying to make China open its market to the forces of competition? If he succeeds the unintended consequence will be to make China’s banks much more efficient and ready to go head to head with the US's banks on the world stage. 

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Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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