The Impact Of The For Banks On The Efficiency Of Chinese Commercial Banks

Since China’s Reform and Opening-up and its accession to the WTO, the banking industry has stepped into a ‘Golden Age’. The foreign banks have taken the advantage of the favorable policy to enter and explore the Chinese market. According to the commitments made when joining the WTO, at the end of 2006 China should completely release the restrictions on RMB operation area and customers, and widely implement the most-favored-nation treatment to foreign banks. There is no doubt that these measures would pose threats to the development of national commercial banks and financial markets. Confronted with the increasing fierce competitions and challenges, a growing number of domestic scholars start to pay attention to relevant foreign studies and actively analyze the impacts exerted by foreign-funded banks’ overall admission and Chinese government’s delivery on the WTO commitments to the efficiency of Chinese commercial banks. Based on these studies, they try to explore corresponding strategies to raise the efficiency of Chinese commercial banks management. This research is guided by the related theories in international economics and corporate governance, and adopts a combination of quantitative and qualitative methods. Based on the literature review, the author has calculated the efficiency of 16 foreign banks listed on A-share market from 2007 to 2014 using DEA. The figures together with other indexes of commercial banks further serve as panel data to build the model for regression analysis, which facilitates an in-depth discussion about how foreign banks’ expansion influences Chinese commercial banks’ efficiency.The conclusion indicates that: Firstly, the entry of the foreign banks in recent years has made it difficult to increase the efficiency of Chinese commercial banks. Secondly, intermediate businesses and other businesses have gradually become the focus in the market share competition between foreign banks and Chinese commercial banks. Moreover, the management of Chinese commercial banks is still in the process of transition from extensive pattern to fine pattern. Finally, the policy recommendations in three aspects have been come up with at the end of the paper to improve the efficiency of Chinese commercial banks.