The Research Of The Effect Of Banking Industry Openness On Commercial Bank Efficiency

It has been nearly 15 years since China joined WTO and commitment to open up the banking industry; actually, our country has fully liberalized the banking industry for nearly 10 years. Over these years, China’s banking market has undergone great changes, for example, foreign banks pour in and be able to enjoy the “national treatment”, which indicating that they can engage in the same business with local banks; what’s more, all large and medium-sized commercial banks continuously go abroad, seeking overseas development actively. Nowadays, the proposal of the “along the way” strategy and the establishment of the Asian Infrastructure Investment Bank will bring the opening of China’s banking industry to a new level. In the process of open-up, what kind of effects of the opening of banking industry has on the operation of our local commercial banks should be explored deeply.This paper examines the openness of the banking industry in our country from two aspects: the opening to the outside and the opening to the inside. On the basis of previous studies, the author made a consideration of four indicators: the degree of openness of the market access for our country’s banking industry, the market share of foreign banks, and the degree of internationalization of the host country’s banks, and then, a quantitative evaluation on the openness from 2000 to 2013 was made. From the results of analysis, it can be seen that the banking openness of our country shows a downward trend after the rise and in the transitional period after China’s accession to WTO, it reached the maximum level. In recent years, there is a decline in the overall openness of the banking industry in China due to the gradually reduce of its internal openness level.The author selected the relevant data of 13 commercial banks from 2000 to 2013 and used super efficiency DEA model to analyze the efficiency of these banks in each year by taking the staff number, the fixed assets and operating expenses as input variables and taking the interest income and non-interest income as the output variable. The results show that on the whole, the operating efficiency of the selected banks present a rising trend in fluctuation. Meanwhile, the operating efficiency of state-owned commercial banks is lower than that of non-state-owned commercial banks, while the ability of state-owned commercial banks to resist external shocks is obviously stronger than that of non-state-owned commercial banks.In the empirical analysis of banking openness influence on operating efficiency of China’s commercial banks, the researcher divided the 13 banks into two groups: the central huijin company or the Ministry of Finance holdings as a group, named state-owned commercial banks, and other banks as a group, named non-state-owned commercial banks. Based on the consideration of the national factor and the industry factor, the researcher established a regression model which was applied to the empirical analysis for the two groups of banks respectively. The outcome presented that the openness of banking sector has no obvious effect on its operating efficiency of state-owned banks, while it has an inverted U-shape effect on that of non-state-owned banks. The growth rate of GDP and the concentration of the banking industry show opposite effect on the operating efficiency of the two groups. Because of their special arrangements of property rights, state-owned commercial banks is essentially an instrument of controlling financial resources for the country, thus, they has been protected by the country. With the over-protection and intervention of the country, any impact from outside is invalid to them. Therefore, it is necessary to reduce the protection of the country by enhancing the outside stimulation effect to improve their operational efficiency. As for non-state-owned commercial banks, there is an optimal degree of openness, which could make its operational efficiency improves fast, however, the current openness of China’s banking industry is still far from this degree. In the end, according to the conclusion of this study, the author proposed some suggestions.