| The financial system structure can be divided into two basic types and they are market-oriented type and intermediate-based type. It is generally accepted that China's financial system belongs to the latter one. Reform of China's financial system is focusing on banking industry. Currently, the Banks have made conversion from"large unified"which was operated at the beginning of the reform to the central bank as the core, the state-owned commercial Banks as the main body, the policy Banks and joint-stock Banks, urban commercial Banks and other types of banking institutions diversification joint competition pattern.With China's banking structure changing, the current obvious problems faced by banking industry are not property rights, but the structure of banking industry. According to the traditional industrial organization theory, the concentration of banking industry will harm competition, while competition can ensure cost minimize. But if the bank gets monopoly power, the bank will ask for a higher price loan and at the same time pay lower price deposits, which may distort savings and investment decisions. Finally, lacking of competition will lead to inefficient banks in the framework of operation. So, this traditional view has been a lot of new challenges to meet. In practice, typical facts tell that the development of the banking industry in different countries to choose the path in the past is also quite different.First of all, this paper makes a realistic inspection the change of structure of China's banking industry and believes that the reform of China's banking industry has distinctive characteristics of stage and keeps up with the pace of economic restructuring. Then, the author makes a comparison between characteristics China's banking industry and international one from five aspects, that is, the property right structure, market concentration, unit banking system, industrial barriers and competitions. Based on previous researches, the author uses the model of structure and analyses it from four aspects, competition and efficiency analysis of the relationship between the bank customers: from the aspect of the banking industry, the optimal number of institutions, From the Angle of potential entrants, banking number (concentration) and competition, From the perspective of efficiency and stability, the number of Banks (concentration) and competition is analyzed, A single bank branch bank banking structure with the efficiency were compared. The conclusion of traditional model does not support industrial organization theory.After discussing structure of banking competitive measure and the structure method, the author selects the heaviest share top 14 Banks of China's banking from 1996 to 2007 as the sample data to analyze and measure structure features and trend of Chinese banking changes by using structural and the non-structural panel data PR model of China's banking. From overall competitiveness of China's banking industry from 1996 to 2007, monopolistic competition is found. According to China's banking development characteristics and the availability of data, the author establishes the annual competitive measure of China's banking PR model in order to examine our banking structure and the dynamic relationship. 1996-2007 competition level changes and trends are analyzed. Based on impulse response to changes in the structure of China's banking industry method, the author explores the influence, but the results do not support the traditional view that is centralized beneath competition.After illuminating the connotation of efficiency, the paper introduces the development of the method of measurement efficiency, and focuses on the non-parameters of DEA method and the decomposition of bank efficiency. By using DEA method, the paper measures technical efficiency, allocation efficiency, and cost efficiency of Chinese banking industry during the period 1996-2007, analyzes the efficiency changes and the development trend and then comparatively analyzes the efficiency of state-owned banks and the joint-stock banks. The conclusion is that their technical efficiency at the same level, but the allocation efficiency and cost efficiency of the joint-stock banks are higher than the state-owned banks'. Then, based on the previous empirical results, firstly using the coefficient matrix briefly analyzes the relationship of the structure of banking, competition and efficiency .secondly, it analyzes their relationship by modeling, concluding that China's banking structure change of banking efficiency is uncertain and to improve the competitive banking allocation efficiency and cost efficiency. Then, impulse response function is applied to analyze the dynamic relationship of China's banking structure, competition. The conclusion shows that the changes of Chinese banking structure have a weaker influence on efficiency, and uncertainty, and the banking competition significantly promotes banking cost efficiency and allocation efficiency, but the impact of technical efficiency is uncertain.This paper presents the main conclusions are as follows:First, through the analysis of China's financial system and international comparison, China financial system belongs to the typical intermediate-based financial system. Commercial Bank in China is an important component of the banking financial institutions. China's banking reforms have distinct phases and keep up with the pace of economic restructuring. This reflects the banking reform goal orientation namely serves in economic development, at the same time embodies the characteristics of gradual banking reforms. At present, Chinese banking structure features embodied in: State-controlled diversified ownership structure, high concentration and big bank equality, branch banking system, strict industry barriers and selective competition.Second, the empirical research on China's banking market structure analysis judgment made by China banking market structure, based on structural and the non-structural method (PR) for our banking market structure. The CR4 indicator, the net assets and fixed assets of China's banking, which exist decreases of the total assets reflect that the state-owned banks with the perfect property right system reform and the four major state banks significantly improved the management level and operational level. China's banking industry has been changing from oligopoly highly concentrated oligopoly higher type; the degree of oligopoly market structure has been weakened. From the overall trend, the market structure of China's banking industry overall trend is to develop in the direction of decentralization.The total assets, the net assets and fixed assets of China's banking and the HHI indicator which have obvious trend of fall down and China's banking industry deposits, loans and profits HHI indicators have slowly downward trend, while interest income HHI indicators stay at a relatively high level. Based on the total assets HHI indicators dividing standard, our country has changed from high to low oligopoly type, even changed to a lower trend of oligopoly. A net profit of HHI and HHI indicators of changes in interest income reflected in the four major state-owned banks inconsistent early profits ability led to a low HHI index, followed by higher net profit of HHI indicators with state-owned commercial banks of China's listing.Third, empirical study based on the non-structural method was made on China's banking industry. The estimation results of PR model show that China's banking is in monopolistic competition and the competition between the four major state-owned Banks above all banking competition. The result is caused by China's four major state-owned Banks, and the size of the extensive branch, the four major state-owned Banks in various levels of competition between the agencies, resulting in more competitive. Through the dynamic analysis of Chinese banking industry competition in banking, competitive before 2000 has rise trend in the competitive banking increases.Another important result is that funding and returns significantly positive correlation reflects the income of China's banking industry rely heavily on traditional deposit. Deposit interest income has the significant effects on the bank and revenues of human investment banking also have significantly influence while the investment of Banking has a weaker effect. The result may be due to the state-owned Banks changing from the planned economy to the major Banks under the market economy system of commercial Banks.The empirical results show that the concentration of banking industry structure does not repel the competitiveness of Chinese banking, cannot simply tie the concentration and the competitiveness together also does not support the traditional model of industrial organization theory.Fourth, through making the definition of the efficiency of banks as well as the decomposition and based on the study of DEA method efficiency of China's banking industry, the results show that Chinese banking industry generally does not focus on the operating costs of control or can not effectively control the costs of the industry cost-effective low. In our country, under the current banking system, a large number of government credit background through administrative system rather than the bank come into the market mechanism which result in the reduction of allocation efficiency. China's banking sector efficiency and cost-effective configuration showed an upward trend, but although technical efficiency has been high, but the characteristics of the downward trend.The comparative analysis of the efficiency of state-owned Banks with the joint-stock Banks'shows that State-owned banks and joint-stock banks have overall level of technical efficiency, but allocation efficiency of joint-stock banks are significantly higher than the allocation efficiency of state-owned banks. The two gradually widened the gap between the trend of cost-effectiveness of joint-stock banks were also higher than the cost-effectiveness of state-owned banks and both are weak upward trend.Last, the empirical results of the dynamic relationship among banking structure, competition and efficiency show that the changes of Chinese banking structure have a weaker influence on the efficiency, either technical efficiency, allocation efficiency, or cost efficiency. So, the author didn't support traditional industrial organization theory that increase of concentration will lead to the loss of banking efficiency. However, the response of banking efficiency to competition is obvious, aside from the fluctuating of the response of technical efficiency. The improvement of banking competition has an observably positive impact on the cost efficiency and the allocation efficiency, the improvement of the competition will significantly promote cost efficiency and the allocation efficiency, and then to improve the overall efficiency of banking industry. This conclusion also supports that the traditional economics theory"fierce competition will promote economic efficiency".
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