Empirical Analysis Of China's Banking Sector

X efficiency of banks describes all technical and allocates efficiencies of individual banks that are not scale/scope dependent. Thus X efficiency is a measure of how well management is aligning technology, human resources, and other assets to produce a given level of outputs.Currently, frontier analysis method has become the most commonly used method in the study of banking efficiency. Frontier analysis method can be divided into two brands:nonparametric and parameter method. Considering of the advantages and disadvantages of two methods, we choose non-parametric stochastic frontier model that was proposed first by Daniel J. Henderson (2003) as a technique to do the empirical study. Using the model, we don't need to specify the form of the frontier function and assume the distribution of the random error. It not only inherits the flexibility of DEA methods, but also takes the random disturbance into account, distinguishing inefficiency item and random error term. And the estimated elasticity coefficient of the frontier function varies over time and performs differently among various individuals. It is more suitable for us to analyze the economic phenomenon dynamically. Unfortunately, J. Henderson just proposed the theory of nonparametric stochastic frontier approach, but didn't explain the meaning of the elasticity and do further empirical research.In this paper, it is a try for us to apply the techniques to estimate production frontier as well as estimate X efficiency of Chinese banking. First, we analyze the elasticity of the banks dynamically. Then we draw some new conclusions. The profit of state-owned banks is most sensitive to changes of fixed assets, while joint-stock banks least sensitive. The average elasticity of the fixed assets is-0.8189 and 0.006387, respectively. The profits of state-owned banks whose elasticity is-1.8533are the most sensitive to the changes in labor input. Then we analyze the elasticity of the banking as a whole dynamically. From 1998 to 2008, the elasticity of deposits is rising and the profit is more sensitive to changes in deposits. In fact, the elasticity may be not a constant, but change. Therefore, compared with formerly SFA which leads to constant elasticity, the conclusions of the elasticity in this article are more close to reality, and more convincing.Then we estimate the profit efficiency and the loan efficiency and analyze them by comparison. We conclude that the loan efficiency is higher than the profit efficiency. State controlled banks and policy banks loan more impulsively with low profitability. At last, we treat every bank in two stages as different banks, evaluate and analyze the condition of efficiency of 15 banks, with the bank whose efficiency is highest in both stages. We conclude that the profitability of state-controlled banks goes up, the condition of loan improves and impulse of loaning is controlled effectively. Both profit efficiency and loan efficiency of joint-stock banks increase. But since 2004, the profit efficiency of policy banks decreases, while the loan efficiency rises to a large extent, showing that the condition of its loan and the profitability deteriorate and impulse of loaning aggravates.