The Comparison Of The Core Competitiveness Of Chinese And Foreign Banks

In the past few years, foreign banks keep expanding their business gradually and become more and more important in China’s financial market. With the competition between foreign banks and Chinese banks becoming more severe, how to face the challenge from foreign banks becomes a big problem for Chinese banks. In this background, researching the exact competitiveness of foreign banks and Chinese banks and whether Chinese banks already well prepared for the severe competition with foreign banks and how Chinese banks improve their comprehensive competitiveness to compete with foreign banks is very meaningful. By using modern statistical methods, this essay analyzes and compares the competitiveness of foreign banks and Chinese banks scientifically and objectively, and answers the above questions. Through comparing the advantages and disadvantages of both foreign banks and Chinese banks, the essay finds the problems Chinese banks have to face and gives appropriate suggestions and solutions, providing some inspiration for Chinese banks.There are6chapters in this essay, chapter1is the introduction and introduces the background of the research, the significance of the research, the methods of the research, the innovation and defects of the research. As China has been the member of WTO for several years and the share of foreign banks in Chinese market becomes larger, Chinese banks have to improve their competitiveness to survive. Banking business is very important to a country’s economy, and the financial crisis of America in2008is the best example. Finding the difference between Chinese banks and foreign banks has great practical significance. In order to give an objective evaluation to Chinese and foreign banks, this essay uses theoretical method and empirical method, and establishes comprehensive index system, and uses factor analysis method and the comparative method. The innovation of this essay is to use the factor analysis method to analyze the competitiveness of Chinese banks and foreign banks, which is different from previous studies which use qualitative method. There are mainly two defects of the essay:one is that the number of samples is not very large, and the other is that the factor analysis method can’t summarize all factors.Chapter2is the theoretical overview of core competitiveness, reviewing the enterprise competitiveness theory, core competitiveness theory and bank competitiveness theory. Banks are special enterprises with general properties of common enterprises and special properties of their own. When doing the research of bank competitiveness, we must consider the difference. There are many foreign researches about bank competitiveness, and the authoritative ones are the CAMELS evaluation system, Standard&poor’s rating method, Moody’s bank rating system, WEF and IMD’s rating system, and the evaluation of English bankers magazine. Many Chinese researchers also have done many researches on bank competitiveness, and write many articles on this topic.Chapter3mainly does the empirical research of core competitiveness of Chinese and foreign banks, which is the core part of this essay. Firstly, we choose profitability index, safety index, fluidity index, development index and management index to construct evaluation index system of the core competitiveness of the bank. We can use the centralized embodiment of the return on equity, return on capital and net profit margins and income margins to investigate profitability, and use capital adequacy ratio, bad loans, mortgage coverage to evaluate safety, and use the bank deposit-loan ratio to measure fluidity, and use the asset growth rate and deposit growth rate to reflect a bank’s development capacity, and use three years’average return on capital to reflect the bank’s management situation. After setting up the index system, the article selects five foreign banks and7Chinese banks’data to do the factor analysis. The basic thought of factor analysis method is to simplify many variables to several factors and to reflect the relationship between original variables and factors. By using SPSS, we get the conclusion that factorl represents the bank’s earnings and management ability, factor2represents the bank’s safety and mobility, factor3represents the bank’s ability of development, and get the scores of all samples in factor1, factor2, factor3and the comprehensive factor.Chapter4analyzes the empirical research result, and ranks12banks in each factor and the comprehensive factor. In factor1, Hang seng bank, HSBC bank and China merchants bank are the best three while Minsheng bank, Deutsche bank and Huaxia bank rows in the last three. In factor2, although ranked first is City Bank, all Chinese banks are ranking front. In factor3, ranking front are Chinese banks while foreign banks, except Standard chartered bank, are the last four. Taking all3factors into account to calculate comprehensive score, City Bank is the first, the second is Hang seng bank and HSBC bank is the fourth. China merchants bank ranked third, which is the best of Chinese banks.Chapter5is the gap analysis of core competitiveness, between domestic banks and foreign banks. From the empirical analysis we can get the conclusion that the Chinese banks is behind the foreign banks except for some individual factors. Compared with foreign banks, Chinese banks’disadvantages are:the scale is insufficient, business innovation ability is insufficient, strategic orientations are not clear. Foreign bank’s two most prominent advantages are human resource management and financial technology.According to analysis results of chapter4and chapter5, chapter6proposes feasible suggestions for Chinese banks. To facing the large challenge as China market is open to foreigners, Chinese banks should promote their core competitiveness through human resources, organizational structure, management and technology. Specific suggestions are the following five:expanding the bank scale, increasing innovation, proceeding strategic human resources management, strengthening bank electronic, network construction, and cooperation with foreign banks.