The Effect Of Foreign Bank Entry On China Banking Efficiency

From a perspective of competition brought by foreign banks entry, combination with three core factors-competition, market structure and bank reforming-this paper investigated the effect of foreign bank entry on the efficiency of China banking sector. Using 16 bank observations from China for the 1995-2004 periods, and applying Eviews 5.0 Econometric Software, we can draw the following conclusions: firstly, foreign banking entry has brought competition on China banking market, through it, foreign bank entry may enable China banking to reduce costs and net margin, meanwhile, increase the quality and quantity of financial service, then improve the efficiency of China banking sector. Secondly , the improvement of efficiency depend on the dropping in China banking market concentration which means that the formation of more competitive market structure may contribute to increase the effect on which foreign banking entry. Finally, the reforming of China banking sector contribute to improve the efficiency too. So, in order to make the empirical test more accurate, we must control the effect of banking reform by set appropriate variable.This paper mainly consists of preface and four chapters, and the main content is as follows:The preface mainly narrates the whole framework, evolving of think and methods of the research. Furthermore, we pointed out the shortcomings and the possible research direction in the future.Chapter one has introduced the present conditions of the research on how foreign bank entry affect domestic banking sector, and made a comment on these views. Chapter two has analyzed the situation of foreign bank entry China banking market. The first section of this chapter made a summary about the history of foreign bank, which was consisted of four different phase. In the second section, we analyzed the character of how foreign bank operate in China banking market, made a contrast about the capacity of competition between foreign bank and China banking sector. In the third section we made a qualitative analysis about the effect of foreign bank entry on China banking market.Chapter three made an empirical test. Firstly, we introduced the process of how to choosing the data and the sample. Secondly, we set a model and defined the variable. Thirdly, we gave the result of empirical testing. Finally, we made a deeper analysis about the result.Chapter four draw the mainly conclusions and gave some advice. In the first section, we draw the mainly conclusions : foreign banking entry has brought competition on China banking market, through it, foreign bank entry may enable China banking to reduce costs and net margin, meanwhile, increase the quality and quantity of financial service, then improve the efficiency of China banking sector. In the second section, basing on those emerging market and Central and East European countries that foreign bank had entried, we made a summary of experiences that came from those countries, and gave some advice about how to introduce foreign bank in China banking market in the future .