Analysis On Efficiency In Chinese Banking And The Influencing Factors

Efficiency is one of the core problems that the economics deals with. It is also the goal that commercial banks chase in their business administration. The efficiency of banking is not only in the individual bank's performance and its competence, but also the reflection of the intrinsic quality of the national economy development. The banking development depends on the efficiency in the long run, rather than the speed. After the entry to WTO, Chinese banking will be confronted with more fierce competitions between native and foreign banks. So it is meaningful in the theory and practice to do some work on the efficiency of Chinese banking and the influencing factors.After the review of some related researches on foreign or native banking, this paper interprets the basic meaning of the bank efficiency and the approaches applied in the researches, non-parametric or parametric. The most generally used two approaches, data envelopment analysis and stochastic frontier approach, are employed in this paper to estimate the efficiency in Chinese banking. We have estimated the technical efficiency of each bank in 1985-2001, exploiting the two different approaches respectively, while the total loan, other investment and profit are specified as outputs, labor, net fixed asset and business expanse as inputs. Then the technical efficiency is decomposed into pure technical efficiency and scale efficiency. The estimation result shows that the efficiency of the whole banking increases gradually and fluctuates at the same time. The efficiency of state-owned banks is lower than that of shareholder-owned banks, which is in coordination with the performance of each kind of banks. The research on the influencing factors is conducted in multivariate regression model, while the DEA technical efficiency estimates are referred as dependent variable. The asset structure, operation competence and earning power have positive correlation coefficient with bank efficiency, while rate of expanse to asset and the state ownership have negative coefficient. The asset scale has negative effect on the efficiency in state-owned banks, while the effect is positive in shareholder-owned banks. Market competition level and education level of labor also have positive effect.Based on the above results, some suggestions are made in this paper. The competitive level in banking market, the technical level, and the quality of the labor andasset structure should be improved. Opening of Chinese banking market should be speeded up when the financial supervision is enforced to keep the banking system stable.