Abstract: The reform of the financial system carried through in China since 1993. The market structure and the overall efficiency in China banking industry had change more than ever. The paper utilizes the nonstructure approach, Panzar-Rosse model, to accurately empirically examine the competition in China Banking Industry. The paper suggests that the market structure in China banking industry is monopolistic competition and the trend of the competition degree in banking industry is dropping. The competition environment of the four state-owned commercial banks has a distinct characteristic, which market structure is nearly perfect competition. The other ten joint-stock commercial banks have a competition degree obviously lower than that of the four state-owned commercial banks. And all of these provide the accurate theory basis for the financial decision-making sector to design the effective economiccal and financial policy.