Study Of The Impact Of Foreign Banks Entry On Chinese Banking Efficiency

According to the WTO agreement, Chinese banking industry would be fully open to foreign capital since2006, which would quicken the pace of foreign banks entering into China. Foreign banks have advantages in product and service quality, management efficiency and asset quality, while Chinese banking industry has many problems like low efficiency and high non-performing loan ratio. So it is of great significance to explore the impact of foreign banks entry on Chinese banking industry.In reference to the previous scholars research results, this paper selects the operating data of14Chinese commercial banks from2003to2014as the sample. Firstly, by using data envelopment analysis model, we will get the banks combined efficiency in represent of the overall efficiency of Chinese banking industry. Secondly, the multiple regression models will be built to analyze separately the relationship between foreign banks entry and the combined efficiency, and the relationship between foreign banks and the other5financial indexes of the banks. Obviously, the combined efficiency and the5financial indexes are dependent variables. As the independent variable, the foreign banks entry is represented by the proportion between foreign bank assets and Chinese banking industry assets. As the control variables, macro-economic and banking sector factors are taken into careful considerations. The regression result shows that there exists a non-significant negative correlation between the current level of foreign banks entry and Chinese banking efficiency. The previous level of foreign banks entry has a significant negative correlation with the current banking efficiency at1%level, meaning that foreign banks entry will obviously decrease Chinese banking efficiency. In conclusion, foreign banks entry has a significant negative effect on Chinese banking efficiency.