Study On The Impacts Of The Foreign Banks’ Entry To The Banks’ Efficiency In China

With being a member of WTO for10years, the entry of foreign banks hasbecome an important part of our “opening-up” policy in banking industry, and it haslaid a solid foundation for our “opening-up” of banking industry and financial system.The existing form of foreign banks in China gradually shift to the form of “corporatebank”, and its business scope, customer base have a rapid increase, the impact on oureconomic and financial development is becoming more and more important.There are two opposite opinions about the entry of the foreign banks have effecton the efficiency of the host countries: One is that the entry will have positive effecton the host countries’ efficiency, and the other is the entry will have negative effect.Being impacted by the specific economic characteristics of China, the development offoreign banks has its unique path in China. Therefore the purpose of this article is thathow the participation of foreign banks will affect the efficiency of China’s bankingindustry, whether the impact on the efficiency of a certain level will produce changesin direction or not, and whether its influence will be changing because of the differentproperty of the commercial banks.In this paper, based on the theoretical analysis of the motivation and mechanismabout the entry of foreign banks, the article uses DEA analysis to measure14commercial banks efficiency which represent the situation of our country. Theresults shows that the general trend of the efficiency of commercial banks keep steadyalthough it has some fluctuations. Based on it, we choose the14representativecommercial banks from2004to2010to be analysis, and this paper will use therandom effects model to make a regression. Thus, this paper will give an objectiveconclusion about the impact which foreign banks’ entry have influence on theefficiency of Chinese bank industry. We can have the following conclusion:1.Controlling the macroeconomic factors, factors of the banking industry, and the bank’sown level,the paper found that foreign banks have significant positive impact ontechnical efficiency of China’s commercial banks.2.Foreign banks’ entry have the"inverted U" shape effect on the efficiency of China’s commercial banks, that theentry of foreign banks will have impact on the efficiency of commercial banks inChina will lead to the changes in the direction to some certain level.3. foreign banksto enter the "inverted U" effect on the efficiency of commercial banks in China didnot produce significant differences due to the different nature of the commercial banks in property.4.the impact of macroeconomic factors on the efficiency ofcommercial banks in China are more significant, the commercial banks in China hasgradually become market-oriented subject, the degree of market competition, marketopenness has become an important factor to affect the efficiency of commercial banksin China. Finally, the paper make some key suggestions on the analysis of theoriesand empirical study.