Analysis And Demonstration On The Effects Of Foreign Bank's Entry On The Efficiency Of Chinese Banking

With China's reformation and entry into WTO, the foreign banks'influences on our financial industry are more and more important. The worldwide experiences have showed that the entry of foreign banks have had significant effects on the banks of the host country. With the fully opening to the foreign banks, China's domestic banks will face more fierce competition and challenge. Efficiency is a represent of banks'competitiveness. Enhancing bank's efficiency is the basis of preventing financial crisis and bank's sustainable development. 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.After the review of some relevant researches from domestic and foreign scholars,this paper introduces the situation of foreign bank entry into China's banking markets, including the history of its development, the form of access, distributions, features and strategies of development.. Then,it analyses the effects brought by foreign banks on China's domestic banks from an empirical perspective: choosing panel data of net interest rate income to total assets,net non-interest income to total assets,total overhead costs to total assets,before tax profits to total assets of domestic 5 state-owned commercial banks and 8 share-holding system commercial banks from 1998-2007,making a regression analysis of foreign bank entry and China's domestic banks'operation,comparing the results of this analysis with the foreign studies. This paper reaches to the conclusion that the foreign bank entry has positive but still limited effects on China's domestic banks'operation,and the share-holding system commercial banks become the main objects effected by foreign bank entry while the State-owned ones'react is not remarkable.In order to discover the deeper influences of the foreign banks'entry, this paper analyzed the influence on the operation efficiency of banks which have introduced the foreign strategic investors. The result showed that the share ratio of banks which have introduced the foreign strategic investors had relations with the improvement of operating efficiency and as a consequence,the asset quality and profitability were enhanced.Finally, above the use real diagnosis conclusions, puts forward some policy proposals to the foreign capital bank to our country bank influence.