Foreign Banks Enter The Chinese Banking Efficiency Study

Since the 1970's, the globalization of the financial industry becomes an irreversible trends. Every country shall open their banking market. With the opening and further opening to the foreign bank, the entry of foreign banks into emerging markets has significant effects on the Chinese banking, especially on the efficiency of Chinese banking. These effects relate with the development and the stability of the national finance system. So the study on the effect of foreign bank's entry on the efficiency of domestic banking in China becomes an important topic in academic community.According to the theories on economic, finance and industrial organization, this paper makes a comprehensive analysis on the effect of foreign bank's entry on Chinese banking efficiency. This paper also suggests some policies on how to develop domestic banking in China. The analysis goes along the technical route "theories—situation describes—theoretical analysis—empirical analysis-policies".First, Charter 1 is introduction. Charter 2 introduces the theories referring to the entry of foreign bank (The structure of the finance and the development of the economy) and the efficiency of banking industry (Theory of Property Rights, Theory of Beyond Property-right, Theory of market structure). Then Charter 3 introduces the current situation of foreign bank entry into China's banking markets.Second, Charter 4 is theoretical-analysis. This paper studies the decisive factors of the efficiency of banking industry and establishes the analysis frame, which consists of the macroscopic factors (market, environment) and microcosmic factors (property rights, internal management). There're other factors, such as the effect of resources distributed, the improvement and supervision of the financial environment.Third, Charter 5 uses panel data of 14 leading banks in China in 1995-2007 periods to make an empirical analysis on the effects. It uses Software DEAP 2.1 established by Tim Coelli to calculate the DEA efficiency. The estimation suggests that: there is the up-tendency of the technical efficiency appearing the figure of "U" and the higher technical efficiency and scale efficiency of joint-stock banks. But there is no obvious correlation between the entry of the foreign bank and Chinese banking efficiency. With the further entry of the foreign bank, the obvious effect will appear on the horizon.Finally, Charter 6 gives the suggestions to Chinese banking for their efficiency-improving, such as changing the structure of the Property Rights. Chinese banking should grasp the chance, face the challenge, improve their efficiency and make endeavor to the economy growth of China.