Foreign Banks Into Effect On The Performance Of The Banking Industry In China

With the advance wave of financial liberalization, many developing countries's financial controls have been relaxed its conditions for the progressive realization of the financial opening-up. Opening up the banking sector as an important part of financial liberalization, will have a greater impact on the host domestic banking sector,even the financial system.The theory studies have shown that the entry of foreign banks, on the one hand, could improve the efficiency of host banking sector through the "competition effect", "spillover effect", and "financial stability effect"; On the other hand, The entry of foreign banks may take negative affect on the host country's customer market and finacial stability through "cherry-picking" behavior.When the host country facing a financial crisis, foreign banks may also become an important channel of capital flight.In addition,the entry of foreign banks will take a "talent effect" that result in the loss of senior personnel and reduce the profitability and management efficiency in the host country banking sector.As the state-owned specialized banks,China's state-owned commercial banks with the distinctive "history of planned economy " mark. The monopoly role on the market, which leads to the low efficiency of the banking sector performance in a balanced state. The introduction of foreign banks have a great significance effect on China's financial industry and even the economic during "the market structure and ownership of structural reforms time".This article related to use the finance theory to analysis the relevant reality of foreign bank's entry in China.And use theory and empirical research methods combined to study the effect of the foreign banks entry into the Performance of China's banking sector.This article seleced 11 commercial banks' panel data from 1999 to 2008, using fixed-effects model for multiple regression analysis, and objectivly measured the effct of foreign banks entering the Chinese banking sector performance. The conclusion is:foreign bank entry on domestic banking sector's "competitive effect" is still very limited, low efficiency equilibrium of the banking industry has not significantly improved,even the entry of foreign banks was rapidly; but the foreign bank entry on domestic banks's "spillover effect"," talent effect " and " financial stability effect " is more significant. Specially,this article has firstly analysis the entry of foreign banks to bring talent effect from the "brain drain" perspective,that further improved the analysis of the effct of foreign banks entry into the banking system on the host country.