Foreign Banks Into The Impact Study On The Efficiency Of China's Banking Industry

Since 1970s, with the integration and globalization of world economy, every country faces the situation of opening or further opening domestic banking industry. And world experience shows that entry of foreign banks will have heavy impact on the country's banking. Along with the opening process of Chinese banking, foreign banks will further affect domestic banking industry. Therefore, it is necessary and important, theoretically and practically, to make research in the impact upon Chinese banking efficiency exerted by the entering of foreign banks and to study corresponding solutions for providing foundation for decision-making on national banking development and finance policy.Based on relevant domestic and overseas research, this paper first discusses in detail the motives of foreign banks' entry into China, from three aspects, ownership advantage, internal advantage and location advantage, applying the Eclectic Theory of International Production, followed by a specific description of current development of foreign banks in China, including their development mode, entry types, and business strategy. Then this paper makes a systematic analysis on the route and conduction mechanism of this influence from the aspects of property system, financial innovation, market structure, as well as cooperation and competition. From general to special, it goes to the specific influence on Chinese banking efficiency with a qualitative study from theoretical perspective, and an empirical analysis based on collected data from 14 largest and more representative commercial banks in China during 1998-2007, which concludes that the entry of foreign banks could enhance domestic banking efficiency. On basis of this, this paper suggests that it is necessary, in macrocosm and also in microcosm, to create good environment for banking operation for correctly properly guiding the entry of foreign banks, and meanwhile to properly handle the relationship between domestic and foreign banks, to help the foreign banks further enhance domestic banking efficiency.