The Empirical Study Of Efficiency Of China's Banking Sector Based On Net Interest Margin

Since the launch of commercialization reform of China's banking industry in 1994, a wide range of academic studies and research have been conducted to identify whether the reform can promote efficiency of the banking sector. The measure of efficiency of the banking sector is an important tool to assess the achievement of China's banking sector reform, and may provide significant advice to the future direction of the reform and for the implementation of specific policies.It is a more direct and comprehensive method that measures the efficiency of China's banking industry with net interest margin from the perspective of social cost.We make two assumptions as follows:the first assumption is that the stock system reform should be efficient if the relation between net interest margin and time variable is negative and siginficant;the second is that listed banks are more efficient than the non-listed.We prove the two consumptions by establishing a model of panel data and coducting empirical analysis.In accordance with the empirical analysis, it can be concluded that after years of reform, there has not been a significant increase in the efficiency of China's banking sector though for listed banks there is a trend of improved efficiency. In addition, we further analyze the key factors that affect the efficiency of banking sector, by examining the net interest margin from which pure spread is eliminated, which provides more evidence of the fact that the listed banks pay more attention to improving their efficiency than the non-listed. Finally, the paper gives some suggestions about how to improve the efficiency of China's banking industry. It is advised that the government should give greater support to intensify the reform of the banking sector and accelerate the process of listing banks which are qualified. Also, China's interest rate reform must act in concert with the reform of China's banking system, and the government should steadily promote the marketization of the interest rate, and consolidate the position of SHIBOR as the benchmark interest rate of China's financial market.