The Impact Of Foreign Entry On China's Banking Stystem

Since the establishment of the first representative office by Japan Ex-Im Bank in China in 1979, foreign banks has sped up its entry into Chinese market. To gain the shares of China bank has become another important way for the Overseas bank capital to enter China, Since Asia Development Bank first purchased shares of Everbright Bank in 1996。As the entrance of China financial market is open to foreign strategic investors, the competition between China banks and foreign banks has become more and more intense, and the cooperation is more and more comprehensive. At the key momentum, Evaluating the affect, opportunity and challenge to domestic bank about the entrance of the Overseas bank capital has very important reality significance to help our banks work steadily and to provide decision method for domestic commercial banks manager。This article utilized modern statistical theory and methods and profited from the domestic and foreign related research results, using a combination of quantitative and qualitative methods to research the impact of foreign banks into China's banking industry. The article first reviews the foreign and domestic literature, and described the relevant theory of financial liberalization and foreign bank entry on banking sector of the host country. Including the meaning of financial liberalization, the motive of financial openness, the factors which decide the level of foreign bank entry and the impact of the host country for foreign bank entry, summarizing the impact of competition,efficiency, financial stability and crisis transmission when foreign bank entry. The paper makes in-depth study on the positive and negative impact of foreign entry in two important approach on Chinese banks. On the basis of the qualitative analysis, this paper using the data of four state-run commercial bank and seven joint-stock commercial banks studies the influence of foreign bank entry on profit and efficiency of domestic banking. The regression models explain the state-owned commercial banks and joint-stock commercial bank's net interest income and non-interest income are negative correlation with the scale of foreign banks, but operating efficiency is positive correlation. At last, the paper put forward some suggestions for Chinese commercial banks. To maximize the profits the entry brings to China, it is necessary to improve competitiveness of Chinese banks, and strengthen the monitoring intensity and deal correctly with the relationship between Chinese and foreign banks.