Banking efficiency in China: Application of DEA to pre- and post-deregulation eras: 1993–2000 Xiaogang CHEN a , Michael SKULLY b, * , Kym BROWN b a Bank of China, Sydney, Australia b Monash University, Melbourne, Australia Received 24 January 2004; accepted 3 February 2005 Abstract This paper examines the cost, technical and allocative efficiency of 43 Chinese banks over the period 1993 to 2000. The goal of this analysis is to identify the change in Chinese banks’ efficiency following the program of deregulation initiated by the government in 1995. Results show that the large state-owned banks and smaller banks are more efficient than medium sized Chinese banks. In addition, technical efficiency consistently dominates the allocative efficiency of Chinese banks. The financial deregulation of 1995 was found to improve cost efficiency levels including both technical and allocative efficiency. D 2005 Elsevier Inc. All rights reserved. JEL classification: G21; P34 Keywords: China; Banking; Efficiency; Deregulation 1. Introduction Banking reforms have been the centre of China’s overall effort to transform a centralized economy into a market-based economy since 1978. This study examines the impact that bank deregulation in 1995 had on Chinese bank cost efficiency. Closer 1043-951X/$ - see front matter D 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.chieco.2005.02.001 * Corresponding author. Department of Accounting and Finance, P.O. Box 197, Caufield East Vic 3145, Australia. Tel.: +61 3 9903 2407; fax: +61 3 9903 1443. E-mail address: Michael.Skully@buseco.monash.edu.au (M. Skully). China Economic Review 16 (2005) 229 – 245