Bank Mergers in China: What Role for Competition?

Abstract

This article examines the likely role of competition in the regulatory analysis of bank mergers in China. Despite financial reforms, the banking sector remains subject to a complex web of financial regulation, with industrial policy favouring stability to facilitate national economic development. While there are currently no Ministry of Commerce (MOFCOM) bank merger determinations under the Anti-Monopoly Law (AML), examples of MOFCOM's merger analysis in other sensitive industries diverge from a pure competition-based analysis, favouring grounds linked to national economic development broadly within the terms of the AML. Given the importance of banking to the Chinese economy, this article argues that competition is unlikely to play a large part in any assessment of bank mergers by MOFCOM, particularly where a foreign bank is involved. Instead, issues linked to 'national economic development' and stability are likely to play the most important role, leading to less predictable merger approval outcomes.