The Study Of The Impact Of Foreign Bank Entry On The Performance Of Banks In China

With the continuous advance of opening up of China’s financial market, foreign investment entered the China’s banking market in diversified forms in recent years. Foreign bank entry as one of important forms drew much academic attention. China fulfilled its commitment when joined WTO and fully liberalized domestic banking market to foreign banks in 2006, so that the competition between China’s banks and foreign banks began all-around. Foreign bank entry brought both positive and negative effects to our banking market at the same time. Learning about the impact of foreign bank entry on the performance of China’s banking sector before and after the full liberalization of the banking market has practical significance.This paper adopts the data of fourteen commercial banks in China from 2003 to 2012 and then studies the impact of foreign bank entry on the performance of China’s banking sector before and after the full liberalization of the banking market from management level, asset quality, profitability and operational efficiency by panel data model. The results shows that:before the full liberalization of the banking market, foreign bank entry suppressed domestic banks to enhance their management level and the overall level of profitability, and promoted the upgrading of their traditional business profitability, non-traditional business profitability and operational efficiency; the impact on their asset quality is not significant. After the full liberalization of the banking market, foreign bank entry promoted domestic banks to upgrade their management level and the overall level of profitability, and promoted the upgrading of their traditional business profitability, non-traditional business profitability with not significant difference with the previous opening; it promoted operational efficiency of domestic with lower degree and the effects on their asset quality was still not significant. It can be concluded that foreign bank entry showed a limited positive effect on domestic bank performance currently, and we should create a freer banking competitive environment to promote them playing positive role..