Chinese Commercial Banks' Efficiency Empirical Analysis

Finance is the core of modern economy. As the most important part of China's financial system, commercial banks are the lifeblood of economic development. In the development of China's national economy and finance industry, commercial banks play the role of financial intermediaries, promoting enterprise development, optimizing capital allocation and reducing financial risks. The quality and efficiency of commercial banks will directly affect the quality of China's economic development. With the deepening of financial reform, the call for financial liberalization, globalization and integration is growing, which brings opportunities as well as challenges to China's commercial banks. With the opening up of China's financial sector, commercial banks face tremendous pressure and there are some direct impacts on commercial banks' efficiency and competitiveness.In order to measure the efficiency levels of commercial banks in China, this paper collected a set of data from the year of 2000 to 2008, including 14 Chinese major commercial banks such as four state-owned commercial banks and other national commercial banks. Through stochastic frontier analysis, this paper calculated the X-profit and X-cost efficiency of the selected commercial banks, showing the evolution and current status of commercial banks' efficiency. In general, during the nine years from 2000 to 2008, China's commercial banks X-profit and X-cost efficiency as a whole are increasing year by year; the average X-efficiency the state-owned commercial banks is lower than that of joint-stock commercial banks; speaking of the growth rate of X-efficiency, the growth rate of X-efficiency of state-owned commercial banks is higher than that of joint-stock commercial banks; in particular, the evolution of the efficiency of X-profit suggests a trend of convergence. Based on the efficiency of commercial banks, factor analysis is carried out in the later part of the paper. The efficiency factors are reclassified into three groups: macroeconomic factors, industry development factors and bank performance indicators. Regression results indicate that the efficiency of commercial banks is closely related with the macroeconomic factors, industry development factors, such as financial deepening (M2/GDP), average sales profit rate of China's industrial enterprises. The establishment of the China Banking Regulatory Commission on commercial banks' efficiency should be paid to particular attentions. Among the bank performance indicator, ownership structure is an important factor affecting the efficiency of commercial banks; In addition, higher levels of intermediary business of commercial banks, higher their efficiency. A few suggestions based on the results of empirical analysis to further improve the efficiency of commercial banks:deepening financial market reform, strengthening bank ownership restrictions and market supervision, developing intermediary businesses.