Efficiency Analysis Of Foreign Banks In China

The number of foreign bank branches in China is increasing fast and there are 42 foreign banks in China by the end of 2013. The foreign banks in China are developing fast and the foreign banks are expanding business in China’s market. However, the related literature on the foreign banks in China is really scarce.After reading relevant papers on foreign banks, the author divided the literature into three parts. The first part is about the theorem analysis on efficiency difference between foreign and domestic banks. The second part is about the theorem analysis on the determinants of foreign bank efficiency. The third part is about the theorem analysis on the method of bank efficiency estimation.This paper gave a brief introduction of the foreign bank development history in China and the main characteristics of the foreign bank in China. After that, the author estimated the efficiency of 32 foreign banks in China with the data between 2007 and 2013. After comparing the data between foreign banks and domestic banks, the author found that the efficiency of foreign banks is significantly lower than the domestic banks and there is no significant difference between the big banks and national joint-stock banks.The author has used the panel data between 1998 and 2013 to analyze the determinants of foreign bank efficiency from three perspectives:the home nation effect, the home bank effect, the host nation effect. According to the analysis, the efficiency of foreign banks has a positive relationship with the experience in China, home bank assets, the similarity between home country and China. The foreign bank efficiency has a negative relationship with the competitor market share. There is no significant relationship between the foreign bank efficiency and the trade between China and the host nation and the ROAA of home bank.This paper comes up with some recommendations on the basis of analysis above.