| Facing the globalization of international finance, improving the commercial bank's international competitiveness is the key of their sustainable development. Efficiency, is one of the core problems which economics deal with, and reflects the competitiveness. The improvement of the bank efficiency is the foundation to keep watch financial risks, and to drive the bank industry's sustainable development. Bank efficiency reflects its performance, as well as the quality of national economic development. In china, the state-owned commercial bank is the main body in our country financial system, the lifeblood of our national economy and the mainstream of the financial activity. As a result, improving the commercial bank's efficiency, and then enhancing the bank's competitiveness, is the inevitable trend after China's entry into the WTO. It's also an important measure to realize the state-owned bank's commercialization and internationalization in order to ensure Chinese financial security and sustainable development. Meanwhile, Chinese bank's reformation is following with the progress of national economic transition, so it's instructive and so meaningful to study the Chinese commercial bank's efficiency.This research includes two parts: one is to analyze the theories and basic meaning of banking efficiency and carry positive research; the other is to discuss the impact of property rights, market structure and financial reform being related to bank efficiency over bank efficiency further. Finally we sum up how to improve the bank's efficiency.Based on the introduction about the characteristics of the transition economy and the background of the Chinese bank, this paper carries out general analysis on the characteristics of our banking system and efficiency, with the comparison of foreign and domestic banking efficiency. The paper adopts 5 financial rations, namely ROA, ROE, cost/revenue, debt/deposit and risk factor to compare the efficiency of big-four, 5 share-holding banks, 5 foreign banks. We find that all the rations of Chinese banks are lower than those of foreign except cont/revenue so that we can have the impression of Chinaese banking industry-low efficiency, which relates to the economic regime.Among the different methods of calculating bank efficiency, we choose DEA(Data Enveloping Analysis ) and SFA(Stochastic Frontier Analysis) based on there features and the specialty of transition economy to estimate the cost efficiency and alternative profit efficiency of 22 commercial banks(4 state-owned commercial banks, 10 share-holding banks, 8 city commercial banks) between 1994 and 2005. We have found that both the cost and profit efficiency of share-holding banks are better than the state-owned commercial banks, but the distance is narrowing. The profit efficiency is far lower than the cost efficiency, and the difference of profit efficiency between the state-owned commercial banks and share-holding banks is bigger. This demonstrates that domestic banks are more concerned with cost control than profit gaining.Besides this, this paper investigates the determinants of banking efficiency in China using related data from stated-owned banks, share-holding banks and city commercial banks by a multivariate linear regression model. The results indicate that several main factors affect banking efficiency, among which ownership structure and market structure stand out. Three methods have different results of bank efficiency, but DEA and SFA cost efficiency have consistency about the order of bank efficiency. They also have some differences in regression about the determinants of banking efficiency with SFA being relatively more accurate.Based on the positive results about the bank efficiency and the determinants, we further discuss the relation between ownership structure, market structure, and financial reform with bank efficiency. This paper first introduces the ownership theory, and concludes all the research results about the relation of ownership and bank efficiency now available. From the experience of the middle-East Europe country, the ownership reform has improved the bank efficiency. It proves that the ownership reform has notable effect on the bank efficiency in the transition country. Meanwhile, this paper analyses the difference between the middle-East Europe country and the Chinese on foreign capital strategy, foreign capital strategy in the middle-East Europe country is majority foreign owned while in china is minority-foreign owned. But the positive results based on the little data show that after the entry of the minority-foreign investor into the bank, the bank efficiency has improved indeed, and it's not the result of "select effect".Another factor to affect bank efficiency is market structure, based on the theory of "structure-conduct-performance (SCP)", this paper use CR4, H index and obstacles for entry to describe the maket features of China and find that Chinese banking market share features of monopoly and far distance from competition of foreign banking market. Furthermore, the paper uses the data of 22 banks to test market power hypothesis and efficient structure hypothesis. The results show that the two hypothesizes is rejected in Chinese banking industry. So we analyze the influence of the monopoly market structure over bank efficiency from the reason leading to become a monopoly market.Finance system is the key in the economy transition. We study the impact of finance reform over bank efficiency from the gradual economic reformation route and bank regulation. Although the gradual economic transition in China reduces the time and friction cost of regime change with support to the steady growth of economy, it's hard to satisfy the needs of banks and leads to the low efficiency of state-owned banks. Bank regulation policy influences the market environment and operation behaviors of banks. Until now, regulation deficiency and excess are co-existent in China, which have effect on bank efficiency.Finally, based on the above results, the article has submitted the suggestion for improving our country banking efficiency. We should accelerate the ownership reform of the state-owned commercial bank, build modern bank system, strengthen market competition, perfect market structure, improve the financial regulation validity at the same time and establish the finance legal system suitable to market economy to ensure bank system stability.
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