The Study Of Moderate Level Of Foreign Banks' Entry Based On The Free Trade Zone

China joined WTO in 2001 which led to its opening-up of domestic banking industry and kept its promise to the fully open of the industry in 2006 when the transitional period is over,resulting in the quicker entry of foreign banks.In September 2013,China(Shanghai)Pilot Free Trade Zone was formally established.Being the pilot of China's further opening-up Policy,Shanghai Free Trade Zone adopted lenient conditions on foreign banks' entry and supervision when compared to non free trade zones.The unique supervision style—Negative List which is universally adopted is also used in the zone to intricate foreign banks' entry based on the rule of“not prohibited is allowing”.At the same time,with the free trade zone's duplication and innovation around all China and accordingly increasingly entry of foreign banks,people began to wonder how they will affect the efficiency of China's domestic commercial banks,leading to more and more studies on this topic.Based on Shanghai Free Trade Zone,this paper mainly focuses on banks'efficiency and uses the first 7 domestic commercial banks that enter the zone with their data form 2001 to 2015 to analyze the impact and variation of foreign banks'entry on the safety,profitability and liquidity of China's domestic commercial banks by using the double-effect model.Meanwhile,this paper illustrated the different responses between state-owned commercial banks and joint-stock commercial banks when faced with foreign banks' entry,discussing the preference for regional protectionism in Shanghai Free Trade Zone.According to the results,we found an"U" style on the impact of foreign banks' entry on the efficiency of China's domestic commercial banks,which was significant in operating costs.Moreover,in order to obtain an reliable interval of this moderate level,this paper constructed an moderate interval of this moderate level on the confidence level of 99%.Accordingly,other thins being equal,foreign banks' entry will improve the efficiency of China's domestic commercial banks as long as the level of foreign banks' entry is within the moderate interval and being closely to the single moderate level.When compared with joint-stock commercial banks,state-owned commercial banks are more sensitive to foreign banks' entry with their assets safety being better improved.Besides,when faced with foreign banks' entry,there is no difference between whether or not the headquarters of China's domestic commercial banks are in Shanghai,that is to say,there is no significant preference for regional protectionism in Shanghai Free Trade Zone.Lastly,considering the above results and China's current situation,this paper suggested that China should focus on both opening-up and supervision,the self-learning ability of domestic commercial banks should be improved to strengthen its competitiveness of intermediate business,different supervision style for state-owned and joint-stock commercial banks should be formed and popularize the experience of Shanghai Free Trade Zone with innovation.