Performance Evolution Laws Of China's Commercial Banking Under The Background Of Financial Liberalization

With the high-speed development of China's macroeconomic, banking conducts importanttransmission as economic development agencies in the development and restructures higher profits.China's banking industry is highly profitable status quo, the necessary in-depth analysis of thecorresponding factors affecting the performance of commercial banks. However, analysis of thecommercial banking sector based on the theory of industrial organization has no definite results.Due to the different stages'features, scholars at home and abroad get very different conclusions. Atpresent, China's banking industry is in a transitional stage in the process of financial liberalization,obtaining high profits in the previous stage has also been widespread concern of all parties, andhow to maintain the efficient operation of the high profits in this context has become a hot issue todiscuss. Therefore, it is necessary to study the factors that affect the performance evolution andquantify its impact in China's banking industry gradually opening up and restructuring process,In the 1930s, the theory of industrial organization has initially formed, Harvard University'sMason as the representatives making a greater contribution. He and his students Bain (1959) intheir empirical research to study the market structure, they find that there is a certain but one-wayrelationship between market behavior and market performance, there are certain one-way to have acausal relationship. These scholars are known as the "Harvard School", whose theory is classicalindustrial organization SCP analysis paradigm. In the 1970s, with the emergence of thephenomenon of "stagflation", University of Chicago Professor Stigler questioned the view ofHarvard School, for they think that a simple one-way causal relationship between the structure -conduct - performance is not consistent with reality. Reality market structure - conduct -performance has the two-way interaction, and empirical studies have shown that in the fiercemarket competition, enterprises have higher productivity and greater efficiency in cost savings, sothat enterprises obtain high profits, resulting in highly concentrated market structure with bigcompanies. Since then, some scholars amend and supplement the SCP paradigm, and graduallyformed "new industrial organization theory" (NIO) with the game theory and informationeconomics theory as the basis and analysis tools.The variety of test and analysis of performance impact factor theory are put forward in theWestern market economy conditions, thus it needs adaptive test in China a developing country. Atthe same time, the previous research phases of the Chinese scholars are different, so that the marketcharacteristics are not the same. With China's banking sector assets expanding rapidly in recentyears, it has a strong specificity and periodicity. The banking sector focuses on asset size, and it isdifficult to sustain profits with the extensive growth of the market share, and high growth can not be long-term trend. Therefore, scholars launched to study the performance of commercial banks inChina, aiming to provide a reference for the government to develop and implement policies in ahealthy financial market to increase bank profits continually. In the rapidly changing economicstructure and financial markets, numerous problems are exposed behind the high profits, so that themore in-depth study of the driving force of the commercial bank profit growth is very necessary. Itwill not only be able to make more accurate quantitative analysis of the impact of various factorson the performance of commercial banks, but also enable the government develop and implementpolicies more effectively to promote the healthy development of the financial industry, optimizeand upgrade the industrial structure. According to "China's Financial Statistics Yearbook"and thebank's annual report data, under the theoretical framework of industrial organization, the paperestablishes the appropriate model and makes use of micro-econometric methods to analyze theperformance evolution and its influencing factors in China's commercial banks. Specific analysisand results are as follows:A. Whether the changes in the inspection of commercial banks in China market performanceare consistent with the hypothesis of market power or efficiency structure hypothesis. First,according to the dynamic changes of the SCP analysis of market structure, in Chinese commercialbanking market Chinese banks still accounted for more than 70% market share, but in the last10years it shows downward trend, with oligopolistic market structure gradually weakening. Secondly,as for the efficiency measure, by adopting the Malmquist productivity index measure, it measuresthe dynamic indicators of factor utilization levels, which can be seen as metrics to reflect the levelof commercial bank management and its evolution characteristics. Finally, using generalized leastsquares method, drawing on empirical research on the commercial banking panel data estimationresults found that the level of performance and market structure of China's commercial banks hasnothing to do, and China's high oligopolistic market structure is due to historical reasons, therefore,it does not meet the market forces hypothesis. The model results show that there is a positiveimpact of the efficiency and asset size on performance improvement, but pre-efficiency. Phasedmodel confirmed that the state-owned banks or joint-stock bank's asset expansion and improvedefficiency have made performance improved, but the joint-stock banks were significantly weakerthan the state-owned commercial banks. We need not only continue to maintain the efficiency ofstate-owned banks, but also guard against financial risks'influence on credit expansion. At thesame time, the performance of joint-stock commercial banks can be improved gradually throughmergers and the establishment of effective competition in the system.B. Analyze the impact on the performance evolution from the perspective of competition.According to the statistical representation of the structural method to measure the degree ofcompetition on China's commercial bank market competition, the degree of competition for China'scommercial banks has increase slightly. However, based on the measurement of the structuralmethod, we cannot explain the changes in its level of performance from the degree of competitionof the expansion of the credit scale, so we can use the speculated variational indicator which canreflect dynamic changes in the competition to measure the degree of competition. Among them, we use the GMM estimation method to estimate the loan demand function, while using the point SURto estimate the cost function. Finally the degree of competition for China's commercial banks is notconstantly changing along a trend, but the volatility changes. In the overall level, competition isreduced. CV changes and a gradual downward trend of indicators of market structure does notmatch, and the results do not support the SCP hypothesis. It further clarify the relationship betweencompetition and performance, using the Granger causality test to confirm that the changes in thelevel of competition is the main factor to cause changes in the banking efficiency, and confirm theview of the efficient structure hypothesis. The dynamic correlation of the verification of both selectthe impulse response function and found that the relationship between the two is not stable aspositive impact. China's banking industry is largely impacted by policy changes, while competitionin the commercial banking sector is not price competition. The banking industry needs to introducemore perfect competition mechanism, the establish a stable macroeconomic environment and goodorder of the financial markets, such as active use of technology innovation, development oftechnology, enhancing competition in the banking sector by increasing the number of banks andother means to promote bank competition, By enhancing the banking sector individuals and theoverall level of efficiency, it will benefit the upgrading of the bank individual and overallefficiency.C. 70 percent of China's commercial banking profits are derived from the reality of depositand loan spreads, and set China's market-oriented interest rate reform as the background. With thepanel data of cycle of changes in interest rates and commercial bank performance, in order toreflect different interest rate term structure selected by different, we first build a comprehensivespread of the corresponding indicators, and performance indicators are selected with theconsideration of the costs, and risks in the banking business performance metrics use applicationdata of Cointegration test, and make use of panel data model estimation method to test therelationship between the two. We found that fluctuation of comprehensive rates is positivelycorrelated of bank performance. We select Flannery's partial adjustment model for a betterunderstanding of interest rate cycle changes in short-term and long-term effects, to analyze it fromthe long-term and short-term, and the results show that the state-owned commercial banks is moresensitive to interest rate changes than the shares of commercial banks, and it is necessary forcommercial banks to consider the risk prevention mechanism in declining interest rates stage.There must be cyclical fluctuations in the interest rate market, therefore, we need to hedge interestrate risk, and establish a reasonable and perfect mechanism to prevent the risk of fluctuations ininterest rates. In this process, the financial industry should pay close attention to the level ofinterest rate fluctuations and cyclical movements, and on this basis establish a reasonable balanceof scientific management mechanism. However, taking into account the continuity of thecommercial banking performance improvement, you need to consider non-interest income, theadvancement of financial innovations and financial services.D. In order to obtain more revenue and to circumvent the risk of fluctuations in interest ratesin non-traditional business product selection in the process of financial liberalization, the descriptive result and model estimation found that non-traditional business of commercial bankingin China has not yet formed a certain scale, and its structure is not rich, and the market is not fullystandardized, and it has limitation in enhancing the role of bank performance. The relativepercentage of non-interest income has not been improved, on the contrast, there was a decrease inthe 2006. The state-owned banks non-interest income is the relatively larger, while the originalnon-traditional business as a joint-stock commercial banks accounted for low percentage in recentyears in non-interest income, even lower than the state-owned banks. The panel data fixed effectmodel test results show, that by the use of its funds and scale advantages in the banking andfinancial reform process, the state-owned banks has a rapid growth in non-interest income, but thiseffect is still small, and the largest impact on bank earnings is the expansion of scale and savingsand loan poor change. Commercial banks meet the demand for financial services with thenon-traditional business, improving the banks'performance. According to the type of non-interestincome, a more detailed study of different types of non-traditional business shows, that a large andstable proportion of interest income is fee and commission income. For China's commercial banks,non-interest income changes are consistent with commission and fee changes in income. Therefore,under the premise of rational planned commission and fee income in a healthy market environment,we increase the financial innovation, rich its sources, and deepen the financial mixed operationwith non-interest income as the main body of non-interest income, to improve service with morerevenue.The experience of research findings obtained in this study contribute to more clearlyunderstand the characteristics of the evolution of the performance of commercial banks in thefinancial reform process, to identify the different factors and the degree of variation. Ultimately, itserve as a refernce to ensure the continued growth of performance of China's banking industry, tofight against financial risks, to formulate and implement public policies, to improve financialservices, and to optimize and upgrade industrial structure with market demand as a guide.