Impact of interest rate liberalization on the income structure of Chinese commercial banks

Purpose Although the broader consequences of interest rate liberalization (IRL) have been widely studied, few studies have systematically explored its impact on the income structure of commercial banks. This study aims to examine this gap by examining the effects of IRL on the income structure of 243 Chinese banks over 2005–2023. Design/methodology/approach Using panel data and fixed-effects regression models with robustness tests, heterogeneity analysis and mediation analysis. Findings The results confirm that IRL has materially increased the proportion of non-interest income in Chinese commercial banks. These effects are heterogeneous across bank types, with joint-stock and city commercial banks exhibiting the most pronounced responses. The results also demonstrate that net interest margin is a key mediator in this relationship, supporting the “margin compression–innovation compensation” hypothesis. Originality/value This study contributes to the existing literature by providing empirical evidence of structural shifts in bank revenue models and offers insights into the broader implications of IRL in the evolution of the Chinese banking sector.