Foreign Banks Into The Impact Of The Efficiency Of Commercial Banks In China

Efficiency is both an important standard of measuring commercial bank's operation and a represent of bank's competitiveness. Enhancing bank's efficiency is not only the basis of preventing financial crisis and bank's sustainable development, but also important to social capital accumulation and distribution. As the number and depth of foreign bank entry increases in recent years, a lot of researches have been made to analyze the effects of foreign bank entry on the host country bank. However, the studies about the effects of foreign bank entry on China's domestic bank's efficiency are still limited.Like other emerging market economies, China's banking system is characterized by backward system, low efficiency and low operational ability. With the fully opening to the foreign banks in December 2006, China's domestic banks will face more fierce competition and challenge. How to raise the competitiveness and increase the efficiency of China's banks is an imperative question. Thus, the study of the effects brought by foreign banks on China's domestic banks is of not only theoretic but also practical meaning.After the review of some relevant researches from domestic and foreign scholars, this paper analyses the path to China's banking and the conductive effects on China's domestic banks' operation of foreign banks. 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 4 state-owned commercial banks and 9 share-holding system commercial banks from 1996-2005, 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.Based on the above results, some suggestions are made in this paper: further deregulation of interest rate; develop off-balance sheet activities and reform China's banking system vigorously.