Study On Efficiency Of Strategic Transformation Of CMBC

Internationalization of currency circulation serves as one significant element of acountry’s economic development. While acting as a leading financial industry whichcontrols currency flow and direction, the bank is deemed as the decisive factor toeconomic lifeline of a country regarding its development. During the favorably longperiod of time in the past, financial control policy of China has being supervising theoperation of the whole bank industry. However, with increasing growth of China’seconomy and improvement of international status, all walks of life are shoulder theheavy task of standing in the international market. For the purpose of making Chineseenterprises adapt to game rules of such huge market and shortening their distanceswith foreign enterprises, Chinese government, while gradually opening its domesticmarkets, focuses on opening interest rate market, introducing participation of foreignbanks in the financial market of our country. Efficiency plays a key role in stabilizingposition of RMB in global currency exchanges and helping achieve more rights tospeak in international market. However, improving efficiency on the basis of a limitedcapital stands as the fundamental guarantee to strengthening competitive advantagesfor a bank. CMBC was established after the introduction of reform and opening uppolicy, and stood and continues to stand as the first joint-equity commercial bankenterprise of China. Growth status of CMBC could, to a certain degree, represents theoverall transformation process of China’s joint-equity commercial banks. CMBC hadnothing to do with the planned economy since beginning and succeeded in becomingone of the most influential banks of China. It adheres to general rules of marketcompetition at all times and even took itself off such huge shallow that all of the top five banks enjoy governmental supports of the government. This paper conducts anin-depth study on the two strategic transformations during the past25years, and bothcomparative and normal analysis methods are adopted to summarize and improve,from specific cases, general rules of efficiency improvement for commercial banks inChina, with references of historical research conclusions.Based on normative study methods, this paper selected other four banks withsimilar development experience to CMBC and conducts multi-angle comparison onfinancial targets, aiming at finding out the specific reason for growth of CMBC. Thispaper also summarizes relevant research conclusions of X-efficiency of the bank andprepares comprehensively macro and micro factors, internal and external reasons,putting forward suggestions and conclusions concerning efficiency improvement ofcommercial banks:(1) Technology serves as the core of efficiency improvement.However, technology can be divided into management technology and productiontechnology. The former means the management system adopted for businessintegration, personnel assessment and customer management, with capability oftimely adapting to both internal and external environments. The latter means theability of a bank in term s of product marketing, enterprise strategic planning andcoordinating operation relations. For this content, advancement of managementtechnology and production technology stands as the core of efficiency improvementfor commercial bank.(2) Developing high-efficiency product serves as thefundamental element to improve bank efficiency. From comparative results of data,banks of China have thrown their operation targets to medium and small enterprisesand intermediate businesses with favorable profits, and nervous marketsupply-demand relationship and industrial monopoly. Such sustained high-efficiencywill not see its end with the intensity of market competition. The paper holds thatfuture development trend of bank is to develop high profit products, act oninternational convention, adapt to development demand of enterprise and walk constantly in the front of customer development track for designing development plan,extending demand for fund and pricing ability.(3) Optimize capital structure to adaptto self development. Capital stands as the root for business conduction of commercialbank, and its structure is closely linked to development direction of bank business.While improving bank efficiency, reflect efficiency of capital operation andcontrollability of cost, finally to optimize capital structure. Excellent capital structurehelps turnover capacity of the capital and reduces capital cost so as to improveefficiency.(4) Ensure validity of risk assessment. For bank industry, own risk andcustomer business risk stand as the two assessment objects of risk assessment. Ownrisk assessment mainly aims at risks on own operation and business process, andcustomer business risk assessment aims at risk degree of business itself and judgmenton future development trend of customer. In terms of risk control, both benefitsbrought and risk efficiency principle, to confine the risk within a reasonable scopewith a balanced development in income, cost and efficiency.(5) Set up reasonableperformance evaluation mechanism. Enterprise operation shall be people-oriented,and initiative of the employee is the driving power of operation efficiencyimprovement for a bank. A reasonable performance evaluation mechanism is able toopen up imaginary space of work for the employee and strengthen independentworking ability, saving negative cost due to stretch-out between post levels.