The Exploration Of The Efficiency Of Chinese Commercial Banks

China is one of the fastest growing economies, and the banking sector plays a crucial role in Chinese rapid economic growth. After the worldwide spread of the global financial crisis in 2008, the global banking is reshuffled:many large global financial institutions were on the brink of bankruptcy. China's banking sector survived and welcomed the great opportunity of development afterwards. At present, Industrial and Commercial Bank of China (ICBC), China Construction Bank (CBC) and Bank of China (BOC) rank the top three in the top ten banks in reference to the market value in the global banking market. This means that after the reform and opening up, China's market economy construction with Chinese characteristics and financial reform have made great achievements.Research of the efficiency of the banking sector is common but new topic, considering that Chinese banking sector is under the deepening reform and rapid development stage. This study can not only explore the development level of the banking sector, but also help to access the efficiency of our banking situation. The financial crisis in 2008 not only directly affected the performance of the commercial banks, but also indirect impact the efficiency of commercial banks through our economic policy and regulatory policy in China. Therefore, the exploration of the efficiency of China's commercial banks has a new meaning, and can offer some highlights in the study the efficiency of China's commercial banks.Efficiency is the core proposition of economics. The main objective of the reform of Chinese commercial banks is to improve the banks'efficiency. This paper, based on the literature review of a large number papers with the theme of bank efficiency, uses financial indicators system, DEA model and Malmquist productivity index to explore the efficiency problem of the commercial banks in China from the micro perspective based on the data from Chinese 12 commercial banks from 2006 to 2010.The content of this paper is as follows: Chapter one Introduces the background of China's banking efficiency which is the reason why we choose this topic, and the designation of this study, including the research purpose, samples, methods and the framework of the whole paper. For a long time, to improve the efficiency of commercial banks is an important part of China's banking reform, which is the way to enhance the profitability and the international competitiveness of Chinese commercial banks and is the important means to increases the value of the commercial banks. Financial globalization and the opening up of China's banking market is speeding up, intensifying the competition in China's banking industry further. So there is urgent need to improve the efficiency of commercial banks to cope with the challenges of the financial industry from home and abroad. Although China's commercial banks have withstood the 2008 financial crisis, and some commercial banks enter the ranks of largest banks in the world, the overall efficiency of China's commercial banks has yet to be improved.Chapter two is the literature review section on the banking efficiency. In this chapter, we first review the foreign research on the banking efficiency, which can be divided into three different stages according to their differences on the efficiency focus. In the first the stage, the researches focus on the banks'scale efficiency. In the second the stage, they focus on the banks'scope efficiency. And in the third stage, they focus on the banks'X efficiency. Compared to the foreign research on the banking efficiency, the research starts relatively late in china and with no clearly stage. We just choose the representative papers in the literature review in China chronologically.Chapter three uses the banks'financial indicators and compare to measure the financial efficiency of the 12 commercial banks. First, we select the eight financial indicators with reference to the commercial bank performance evaluation index system issued by China's Ministry of Finance and China Banking Regulatory Commission and foreign commercial banks'performance evaluation index system. Second, According to the importance of the financial indicators in evaluating the efficiency, we give each indicator an appropriate weight. And we set the standard measure scale value and the standard coefficient value to construct the financial index system. Last, by the financial indicator system, we measure the financial efficiency of China's commercial banks and analyze the efficiency results. Chapter four introduces the DEA theory and models, and uses the method of data envelopment analysis (DEA) to analyze the technical efficiency, scale efficiency and pure technical efficiency measure of Chinese 12 commercial banks based on the input-output cross-sectional data. After that, based on the efficiency results from the financial indicators system analysis and the DEA, we analyze and compare the overall efficiency of 12 commercial banks and the efficiency differences between the four major commercial banks and other joint-stock commercial banks.Chapter five uses DEA method——Malmquist Productivity Index to explore the total factor productivity and efficiency changes of Chinese 12 commercial banks from 2006 to 2010. We first describe the Malmquist Productivity Index method. And then we use the input-output panel data from 2006 to 2010 to analyze and compare the 12 commercial banks in reference to the efficiency change index (EFFCH), technical change index (TECHCH), pure Technical efficiency change index (PECH,) scale efficiency change index (SECH) and Total Factor Productivity Index (TFPCH).Chapter six is the conclusion part. This part summarizes the efficiency conclusions of commercial banks from the empirical study from the chapter three to five. And then we propose the directions for future research.