How Did China’s WTO Entry Affect the Local Banking System in the U.S.?

We analyze how the product market competition shock due to China’s WTO entry affects local US banks heterogeneously. Using a difference-in-differences empirical strategy, we document that in regions with greater exposure to the shock, loan quality deteriorates and bank profitability declines more severely, coupled with slower loan growth and higher loan interest rates after the shock. Further, small banks lose market share and banking market concentration increases more in these regions