The Research And Analysis On Efficiency Of Chinese Commercial Banks

Bank efficiency has long been the focus in the research of bank competitive advantage. Since China joined the WTO, the Chinese banks have faced more severe competition come from foreign banks. Thus, the research on bank efficiency should be one of the important approaches to improve Chinese banks' competitive ability, which, for this reason, constituted a main issue studied in this work.Based on 4 state owned banks and 13 integrated samples from both state owned and stock banks, combined with characteristics of Chinese commercial banks, an input/output index system was constructed accounting for the profit ability and the asset quality of the banks. Using the C~2R model of the Data Envelopment Analysis, the technical efficiency values of 13 commercial banks in China from 2002 to 2005 was measured. The input redundancy of total deposit, labor, net value fixed assets, and output deficiency of interest revenue, ROE, performance loan ratio were also calculated. In addition, the banks that have been on the frontier edge were compared using an improved MC~2R model.It was found that the technical efficiency of stock banks were generally better than those of state owned banks, and those of stock commercial banks that with appropriate scales and came into market earlier were even higher. The input redundancy was very popular in Chinese commercial banks, especially in state owned ones. The other two outputs-ROE and the performance loan ratio were also deficient badly. Based on the research results of this work, some suggestions were made for improving the technical efficiency of commercial bank as references in the reform of Chinese commercial banks.