The Effects Of Foreign Banks’ Entering To The Efficiency Of Chinese Commercial Banks

Entering into the1970s, financial liberalization and financial globalization sweeping through nearly all the countries, which, in the global scope, has become an irreversible trend. Many countries have relaxed the country’s financial control conditions, making the national finance open to the world gradually. Since the reform and opening up, foreign banks have developed fast in China. Especially in late2001, when China joining the WTO, China accelerated its financial opening. In December11,2006, China kept its promise when it joined the WTO:to cancel the limit in foreign exchange business and RMB business and many other areas so that foreign banks can operate their business in mainland China without regional restrictions, business and customer restrictions.A large scale of foreign banks’ entry, which means not only opportunities but challenges as well. First of all, Chinese banking industry could draw lessons from the foreign banks’advanced product and managing experience, absorb the excellent talents. However, as the full liberalization of China’s banking industry, the challenges and competitions which it has to face are becoming more intense. The efficiency of a bank embodies its competitiveness, thus the bank efficiency is essential for promoting the sustainable development and the ability to guard against financial risks. Therefore, systematically researching the banking efficiency effects of foreign banks entering into Chinese financial market is significant in both theory area and the practical theory.In this paper, we mainly use the econometric method, on the basis of the former research results, with the functions of panel data, time series data and other forms of model, to analysis the banking efficiency effects of foreign banks entering into Chinese financial market.Specifically, at first we briefly introduce the development process and status of foreign banks in Chinese financial market.Secondly, we mainly carry on the empirical analysis on two aspects. A: focusing on the relevant concepts and methods of bank efficiency measure, and we use the SFA method to test the bank efficiency with the data of15Chinese banks(including5state-owned banks and10joint-stock banks) from1995to2011. B:we select a series of measure data to test the content of foreign banks’entry from1995to2011, and through the regression with the bank efficiency data, to measure the effects of foreign banks’entry. At the same time, we analysis the state-owned banks and joint-stock banks separately, to see if there are something different between the2kind of banks in the foreign banks’entry.At last, we give the policy recommendations on how to improve the efficiency of Chinese banking industry and to control the entry of foreign capital. The main conclusions of this paper are as follows:1. There is an inverted U shaped relationship between the entry degree of foreign banks and the efficiency of Chinese banks.2. The efficiency of China’s state-owned commercial banks and joint-stock commercial banks since1995showed a gradual upward trend, but the rising rate gradually slows down. Additionally, the average efficiency of state-owned commercial banks is lower than the efficiency of joint-stock commercial banks, but the gap between the two is being reduced year by year.3. The nature of property right of commercial banks in China has influence on the effects of foreign bank entry.4. The effects of foreign banks’entry have changed since China joined the WTO. However, the joint-stock commercial banks facing the change reflected more obvious whereas state-owned commercial banks saw less obvious.