The Research On Relationship Between Entry Of Foreign Banks And Performance Of Chinese Banking

With the development of the global economic integration and financial liberalization, many multinational banks (MNBs) are actively trying to build their branches or subsidiaries to run the financial business all over the world. Researches indicate that the entry of foreign banks has obvious influence on the performance of local banks. Since 1980 China began to open domestic financial market to the outside world, in more than 20 years, achieved quite amazing development in institutions, asset size and business, foreign banks has become a force of China's economic and finance that can not be overlooked. Especially, China was opened its financial market completely at the end of 2006, foreign banks will have more room for development in Chinese financial market. It is very important to research on the impact that foreign banks bring to China's banking, such as raise the competitiveness of Chinese banking, response to the new challenges correctly and ensure the stable operation of Chinese banking.Firstly, analysis the impact of foreign banks from the theoretical aspects: technology demonstration effect of foreign banks will raise the domestic banking management and financial innovation ability, but in the competition of business, customers and talent, foreign banks will pose a severe challenge to Chinese banking. Based on the theoretical research, the paper uses panel data of 14 representative banks in Chinese domestic banking market in 1996-2005 periods as the studying sample, to look into the impact of the entry of foreign banks on the performance of Chinese banking. In the course of empirical analysis, by dividing the sample into three objects: the state-owned commercial bank (4), the joint stock system commercial bank (10) and the total commercial bank (14),selecting assets share and the loan market share of foreign banks in China to measure the variables of foreign banks enter, introducing banks' assets share, equity rate, inflation rate and GDP growth rate as control variables, and using margin rate, non-interest income rate, expense rate, pre-tax profit margin and liquidity to measure the performance of Chinese banking, the paper tested the effect that foreign banks impact on the host country whether be reflected in China. The empirical results suggest that: (1) the impacts of foreign banks entry to joint-stock commercial banks are greater than the state-owned commercial banks; (2) Foreign banks entry leads to higher non-interest income rate and expense rate, which shows that "the effect of banking technology demonstration" has been embodied in China; At the same time, the estimation results suggest that foreign banks entry leads to higher pre-tax profit margin and reduction of liquidity, but the relationship between margin rate and foreign banks entry is not remarkable. In the short term, foreign banks did not break the Chinese banking inefficient-balanced situation, "the market competition effect "is not significant.By integrating the conclusions into the reality of China, the paper tries to provide some advices. To break the Chinese banking inefficient-balanced situation, we must improve the competitiveness of China's banking market conditions, in addition to continue to encourage foreign banks to enter, but also promote Chinese banking open up to domestic. Faced with the full access of foreign banks, China's banking sector should take the initiative to improve learning ability and increase its intermediate business development, so can they response to the rigorous challenges that the foreign banks brings to them.