Empir Econ (2011) 41:199–226 DOI 10.1007/s00181-011-0465-0 Cost economies, efficiency and productivity growth in the Chinese banking industry: evidence from a quarterly panel dataset Jun Du · Sourafel Girma Received: 31 May 2009 / Accepted: 21 February 2011 / Published online: 3 April 2011 © Springer-Verlag 2011 Abstract This article examines cost economies, productivity growth and cost effi- ciency of the Chinese banks using a unique panel dataset that identifies banks’ four outputs and four input prices over the period of 1995–2001. By assessing the appro- priateness of model specification, and making use of alternative methodologies in evaluating the performance of banks, we find that the joint-stock commercial banks outperform state-owned commercial banks in productivity growth and cost efficiency. Under the variable cost assumption, Chinese banks display economies of scale, with state-owned commercial banks enjoying cost advantages over the joint-stock commer- cial banks. Consequently, our results highlight the ownership advantage of these two types of banks and generally support the ongoing banking reform and transformation that is currently taking place in China. Keywords China · Banking performance · Efficiency · Productivity · State ownership JEL Classification G21 · D21 · G23 · G28 J. Du (B ) Economics and Strategy Group, Aston Business School, Aston University, Birmingham, B4 7ET, UK e-mail: j.du@aston.ac.uk S. Girma Nottingham University Business School, Jubilee Campus, Nottingham, NG8 1BB, UK e-mail: Sourafel.Girma@nottingham.ac.uk 123