China is reforming its banking system, partially privatizing and taking on minority foreign ownership of three of its dominant ''Big Four" state-owned banks. This paper helps predict the effects by analyzing the efficiency of Chinese banks over 1994-2003. Findings suggest that Big Four banks are by far the least efficient; foreign banks are most efficient; and minority foreign ownership is associated with significantly improved efficiency. We present corroborating robustness checks and offer several credible mechanisms through which minority foreign owners may increase Chinese bank efficiency. These findings suggest that minority foreign ownership of the Big Four will likely improve performance significantly.

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National measures of competition and macroeconomic activity have been used by researchers in recent years to explain performance and risk differentials across banks. However, such measures may be inappropriate for banks which operate with a regional focus. In this paper we construct measures of competition and economic activity using regional data to examine bank stability in 11 European countries over the period 2000-2008. The results suggest that a U-shaped relationship exists between regional bank competition and stability. This implies that a moderate level of bank competition is required to keep bank risks at a minimum level. Furthermore, regional economic conditions play a significant role in determining the stability of European banks.