The Relationship Between China Banking Efficiency And External Environment Factors

After the market economic reform in 1994, the external environments of China commercial bank have been changed a lot, this paper uses the panel data of 14 commercial banks over the period 1996 to 2004, and takes Two-stage Method to examine the relationship between China banking efficiency and external environment factors. First, we use data envelopment analysis(DEA) model to measure the 14 China banking efficiency, the second use the econometric model to examine the relationship between banking efficiency and various bank-specific characteristics such as ROE and environmental factors such as fiscal deficits,bank competition and so on.We find that China banking efficiency was improved but fluctuant in 1996-2004, the Total Factor Productivity (TFP) of banking in 2004 has been improved nearly 27.69% relative to those of 1994, where the contribution of external environment factors versus banking internal factors is 7 versus 3, we can find that most of the TFP growth contributed by external environment factors. We also find positive relationships between GDP growth rate,banking competition,foreign bank coming,fiscal deficits,net interest gap and banking efficiency, but negative relationships between private credit,Asian Finance Crisis and banking efficiency. Of course, these findings need to examine further.