The Impact Of City Commercial Banks’ Entry On The Competition And Efficiency Of Chinese Commercial Banks

With the continuous and thorough reform of Chinese banking, as “the third echelon” of ourbanking, city commercial banks have become an important part of Chinese banking systemwhich can not be ignored. This paper is based on the perspective of industrial organization, takescity commercial banks as the research subject and analyzes the impact of its entry on thecompetition and efficiency of our commercial banks.Firstly, through two stage Stackelberg model and the qualitative analysis of the specificcompetitive behavior of banks to study the impact of city commercial banks’ entry on thecompetition of Chinese commercial banks. Then uses PR model and a panel of nineteen Chinesebanks over the period2003-2012to make empirical analysis and finds that city commercial banks’entry will intensify competition of Chinese banking, but with the constant entry, it may produceexcessive competitive effects. Currently, city commercial banks still belong to the initial stage,encouraging the development of city commercial banks can contribute to improve thecompetitive landscape of Chinese banking market.Further analysis reveals that through the competitive effect, locking and anti-locking effect,the effect of resource allocation and financial stability effects, the entry of city commercial bankswill have an impact on the efficiency of our commercial banks. Therefore, on the basis ofmeasuring the comprehensive technical efficiency, pure technical efficiency and scale efficiencyof our commercial banks using the DEA model, this paper uses an empirical analysis and thenfinds that there is an inverted U-shaped relationship between the efficiency of Chinesecommercial banks and city commercial banks’ entry; the efficiency of commercial banks has apositive relationship with the market concentration, but exists a U-shaped relationship withownership structure and so on. Accordingly, this paper puts forward the policy recommendationsof improving the competitive landscape of Chinese banking market, enhancing bank efficiencyand developing city commercial banks.