This paper investigates whether and how high-speed rail (HSR) construction affects local bank performance. Using the difference-in-difference method, we find that the city commercial banks (CCBs) significantly experience an overall decrease in ROA after HSR is introduced in the headquarters city. Mechanism analysis suggests that the HSR-driven city connectivity imposes the local CCBs on the intensified banking competition related to capital flows, and governance improvements associated with information flows. HSR exerts more pronounced impacts under higher financial liberalization. The findings are robust to the endogeneity concerns. We highlight the indispensable role of transport infrastructure in banking development.

What might interest rate liberalization do to intermediation and the cost of capital in China? China’s most binding interest rate control is a ceiling on the deposit rate, although lending rates are also regulated. Through case studies and model-based simulations, we find that liberalization will likely result in higher interest rates, discourage marginal investment, improve the effectiveness of intermediation and monetary transmission, and enhance the financial access of underserved sectors. This can occur without any major disruption. International experience suggests, however, that achieving these benefits without unnecessary instability, requires vigilant supervision, governance, and monetary policy, and a flexible policy toolkit.

Abstract Universal corporate banks are defined as financial institutions that may offer the entire range of financial services, and own equity in financial and non-financial firms. The emergence of universal corporate banks is one of the responses of banks to the environmental changes in global financial markets. An idealized model of corporate bank is developed to describe the nature of corporate bank. The corporate banking policies include internationalization of financial services and information net-work, expansion and integration of corporate banking functions, creating close corporate clients relationship, acquiring knowledge and information advantage in corporate and financial markets, performance of corporate control and corporate governance to influence corporate management. Transaction cost and other theories are used to explain the universal corporate bank, especially the rationale for expansion and r-organization, for developing close corporate relationship, for acquiring information and knowledge of corporate clients, and the influence concerning corporate governance. In this study, the evolution of regulation, present situation of banking system, future development of corporate banking in some countries are investigated. It is found that free selection of organizational structure and financial activities of financial institutions is a general tendency in these countries. The problems such as conflicts of interest, culture conflict encountered when implementing corporate banking policies are discussed in this study. Different organization designs, management models, external regulations, and corporate culture are introduced as solutions. The development of corporate bank has great implications for financial reform in China. The pre-requisitions and barriers of developing universal corporate in China are discussed. A case study of China Construction Bank is utilized to illustrate the current situation and further development of banks in China. It is argued that a gradually financial liberalization with correct order should be accomplished. Some recommendations are produced for further reform of financial market in China including diversification of bank’s ownership, permission of foreign banks enter Chinese financial market, liberalizing interest rate, and establishing a fully floated foreign exchange market.