The Research Of The Effect Of Entry Of Foreign Banks And Financial Crisis On China’s Banking Sector Concentration Evolution

Since reform and opening up in1978, China has experienced30years of reform anddevelopment. Accompanied by strong economic growth, China’s banking sector is alsohigh-speed development, and gradually formed a banking system with five state-ownedcommercial banks as the main market-oriented. Domestic commercial banks by sharereform listed on the rapid expansion of the scale, but generally faced with the problem of"big but not strong" as well as the lack of comprehensive service capabilities. Especiallyin corporate governance, internal management, risk management and control, productinnovation, there is still a wide gap between the foreign banks in the world’s advancedlevel. In the Chinese banking industry, the four state-owned banks still occupy the mostimportant position in the market, a total of only16listed banks. In recent years, China’sjoint-stock commercial banks, city commercial banks and rural commercial banks hasbeen a huge development, but these banks in the competition is still in a relatively weakposition. The competition is a market-oriented basis, the most effective means to reducecosts for the industry to enhance the performance of the industry. Chinese banks how toabsorb the advanced management experience of foreign banks, and improve the degree ofcompetition in the banking sector, and thus enhance overall competitiveness of theChinese banks and the level of performance is an important goal for future development.This paper take time as the main line and use two-step method, select the2008financial crisis as the time node, first using Panzar-Rosse model to study China’s bankingsector the degree of competition in the banking sector overall2003to2011. And then usethe regression model to examine the level of foreign bank entry for the degree ofcompetition in the banking sector. The conclusion is that China’s banking sector isgenerally in a monopolistic competition market, China’s banking sector in2003to2007and2008to11years during which time the concentration showing a downward trend. In2008, China’s banking sector concentration increased dramatically, indicating that atightening of policy in response to the crisis in China’s banking sector to take. The degreeof foreign capital into a coefficient is not significant in the regression analysis of the levelof foreign banks enter for the banking market concentration, but significant quadraticcoefficient, which indicates the degree of foreign bank entry for the banking industryconcentration showing a U-shaped non-linear relationship.