Research On The Effects Of Foreign Banks Entry On The Efficiency Of Domestic Banking In China

Since the 1970s, with the globalization of economy, the financial industry is experiencing liberalization and internationalization. The worldwide experiences has showed that the entry of foreign banks into emerging markets have had significant effects on the financial host countries .Since the end of 2006, China has been totally opening financial industry according to the WTO regulation.The entry of foreign banks into emerging markets will have significant effects on the Chinese banking. So, the study on the effect of foreign bank's entry on the efficiency of domestic banking in China becomes an important topic in academic community.According to the theories on economics, finance and banking organization, this paper makes a comprehensive analysis on the impact of foreign bank's entry on Chinese banking efficiency. The author uses comparative methods, academic models and empirical analysis to make a study on the influences. Besides, mathematical models are created and using data about Chinese banking, empirical analysis can show the estimation results. Therefore, this paper suggests some policies on how to develop domestic banking in China.The paper makes use of the Data Envelop Analysis (DEA) approach to evaluate the technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE) of the 9 Chinese commercial banks, and comparative study of the efficiency of changes before and after WTO accession. The results showed that the entry of foreign banks to improve the efficiency of the domestic commercial banking industry, but not to raise rates, impact is not very significant. Then through empirical analysis, a thorough inspection of foreign banks into Chinese commercial banking sector technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE) of the analysis, I will sample the state-owned banks and joint-stock commercial banks. Banks and samples were inspected and all its empirical results show that foreign banks entry to improve the pure technical efficiency (PTE), but the impact of the rests is not very significant. Moreover, as joint-stock commercial banks than the state-owned banks, a flexible mechanism, the burden small, strong ability to innovate, foreign banks to enter the overflow, the demonstration effect in joint-stock commercial banks have better reflected.