| As China’s economic reform and opening up and deepening of financial liberalization, the speed of the entrance of foreign-funded banks to China’s banking industry is accelerating. Especially after China’s entrance to WTO, China made the promise that it would open up its financial market step by step in the following five years. In2006, China opened its banking to the world in a wide range by granting the foreign-funded banks the national treatment in China. Without the restriction of business scope and area, the foreign-funded banks have accelerated their steps towards China by enlarging their branch net. Their business scales have enjoyed rapid development. The competition and cooperation between foreign-and-domestic-funded banks grow deeper and deeper. Under this background, it has great practical significance to make researches on the impacts exerted by foreign-funded banks on the operation efficiency in China’s banking industry and to analyze opportunities and challenges brought by foreign-funded banks so as to help domestic-funded banks to cope with the effects of the entrance of foreign-funded banks correctly and to ensure the steady and safe operations of domestic-funded banks in the competition.On the basis of relevant research results at home and abroad, this paper adopts the combined pattern of the quantitative and qualitative methods to investigate the impacts of the entrance of foreign-funded banks on the operation efficiency in China’s banking industry. The paper first reviewed the relevant literature reviews on this topic made by scholars at home and abroad and then elaborated the relevant theories of this topic as well as of the transnational operation of banks. The relevant theories include the motivations of the transnational operation of foreign-funded banks, competitive edges of foreign-funded banks, and the impacts of the entrance of foreign-funded banks. The paper mainly summarized its impacts on competition, efficiency and financial stability. Based on this background, the author discussed the background, progress and development of the entrance of foreign-funded banks combined with the current situation of China. Later, the paper analyzed the effects brought by this change from the positive and negative perspectives in order to demonstrate in a scientific way. On the one hand, the entrance of foreign-funded banks have some positive effects on China’s banking:their entrance helps transfer advanced technology to domestic-funded banks; it helps improve China’s competing mechanism of banking; it also helps nurturing talents of China’s banking; promoting diversity of China’s financial products; attracting foreign investment and developing and perfecting of China’s financial market. On the other hand, the entrance of foreign-funded banks have exerted negative influences on China’s domestic-funded banks, such as intensifying market competition of China’s banking, fighting for high quality customer and talents, which will bring new problems for financial regulation of China.In this paper, the author makes use of panel data from EVIEWS to verify the impacts of the entrance of foreign-funded banks on profitability and running efficiency of China’s banking. The study chooses some financial data of14Chinese banks which are representative and macro-economy as variables. The empirical research proves the following results:1. The entrance of foreign-funded banks has brought significance positive effects on the income of domestic-funded banks (H2, i.e. the measurement of non-interest income rate). The entrance changes the original business model of China’s banking industry, improving the financial innovation and level of service so as to enhance the proportion of non-interest income in total income. However, due to the factors such as China’s existent interest rate system, foreign-funded banks have not brought significant impacts on the interest of domestic-funded banks.2. The entrance of foreign-funded banks has significant negative impacts on profits of domestic-funded banks (H3i.e. the measurement of pre-tax profit margin), which shows the entrance does have brought great shock to China’s banking industry. Foreign-funded banks, by virtue of its high efficiency and quality, have brought great pressure to China’s commercial banks, at least on the partial market such as intermediary business.3. The entrance of foreign-funded banks has brought great operating fee rate, which forms a significant negative correlation with costs of domestic-funded banks (H4, i.e. the measurement of operating fee rate). This shows that the entrance of foreign-funded banks have intensified the competition in China’s banking industry, which prompts domestic-funded banks to constantly enhance their management efficiency, reduce operating costs so as to improve their market competitiveness.4. The entrance of foreign-funded banks has little impacts on risk management of domestic-funded banks (H5,i.e. bad debt preparation rate), yet the degree of the entrance forms an insignificant positive correlation with H5It proves, to some extent, with the deepening of the entrance of foreign funds, China’s banking risk resistance ability has been improving. Taking the consideration of the results discussed above, the market competition, technology spillover and financial stability of foreign-funded banks as well as the absorption effect of domestic-funded banks has become rather obvious.On the basis of the empirical results, the author proposes correspondent suggestions for domestic-funded banks in face of the challenges and opportunities brought by foreign-funded banks. Firstly, domestic-funded banks should make a full play of its "home" advantage to improve the application of information technology in banking and to raise their competitiveness in an all-round way by strengthening their cooperation with foreign-funded banks Secondly, in order to achieve diversified operation, domestic-funded banks should fully grasp the opportunities brought by the entrance of foreign-funded banks, positively expand the intermediate business and promote the process of mixed management. Thirdly, domestic-funded banks should introduce advanced management experience, following the development of new financial business and technology. They should, on the basis of China’s national conditions, make constant innovation of financial business varieties and service means to enhance development momentum. Finally, although foreign-funded banks have not yet exerted the significant impacts on the risk resistance ability of China’s banking industry, domestic-funded banks still have to improve their own risk control management system to prevent the potential danger. |
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