A Comparative Analysis On Operating Efficiency Of Chinese Banks And Foreign Banks

Since the reform and opening,our country has been deepening the reform of the financial industry and has gradually opened financial market to the outside world,and there have been more and more foreign banks operating in China.Since China joined the WTO in 2001,foreign banks and Chinese banks have been given same national treatment,which contributes to the increasing competitiveness of the domestic banking industry.Chinese banks must adjust operating strategy in order to improve operating efficiency and competitiveness.So this paper makes a comparative analysis on operating efficiency of Chinese banks and foreign banks to find out the operating disadvantage of Chinese banks so as to figure out how to improve the efficiency of commercial bank management in China.The study of relevant papers on foreign banks and bank efficiency finds out that current domestic studies mainly concentrate on the impact of foreign banks’ entering into Chinese financial market on the Chinese banks.However,there has been few study comparing the operating efficiency of the Chinese banks and that of foreign banks.In conclusion,making a comparative analysis of operating efficiency of Chinese banks and foreign banks and exploring the factors that influence the operating efficiency are of the theoretical and practical significance.This paper,first of all,uses the DEA model to measure the operating efficiency of the 16 Chinese banks and 26 foreign banks in 2012—2015,and works out the operating efficiency,pure technical efficiency and scale efficiency.Comparative analysis finds out that the operating efficiency of Chinese banks is higher than that of the foreign banks because of Chinese banks’ higher pure technical efficiency and scale efficiency.In term of the pure technical efficiency,Chinese banks show a trend of decline,which means that the Chinese banks need to improve management technique.On the contrary,the pure technical efficiency of foreign banks is increasing year by year,shrinking the gap between Chinese banks.In term of the scale efficiency,the Chinese banks remain at a high level,but the scale efficiency of foreign banks is declining year by year.The ordinary DEA model cannot compare efficient banks,so this paper uses the super efficiency DEA model to measure the super efficiency of the efficient banks to further distinguish efficient banks,making the comparison results more accurate.Then the Tobit model is used to explore the factors influencing the efficiency of Chinese banks and foreign banks and the result finds out that Chinese banks have unreasonable asset size and relatively low innovation ability.Finally,based on the operating shortcomings of Chinese banks analyzed above,this paper comes up with suggestions on how to improve the operational efficiency for Chinese banks.At present,domestic studies mainly concentrate on how the foreign banks enter the Chinese financial market and influence the Chinese banks and there has been few studies comparing the operating efficiency between the Chinese banks and foreign banks.Therefore,this paper makes a supplement to the existing studies on foreign banks.