The Impact Of Financial Opening On Bank Efficiency

Since entering the new era,China's economy has ushered into a stage of high-quality development,and the requirements for the banking sector have become increasingly strict.In order to meet the needs of the market,domestic banks need to improve their business capabilities and competitiveness.China's banking sector is of strong policy nature,and it has been a national priority to improve the vitality of banks.Among various strategies to achieve this,the idea of triggering reform by opening up seems to have been the mainstream.Since 2018,China has introduced more than 40 measures to expand financial openness.It is China's commitment to open up the financial industry when it joined the WTO,and this paper will investigate the role of financial openness in improving the efficiency of the banking industry.This article starts with bank efficiency and uses Data Envelopment Analysis(DEA method)to calculate the technical efficiency values of 5,114 sample banks during 2009 and 2016.Based on this,the effect of financial opening on bank efficiency is empirically found: financial openness will impede bank efficiency in the short-term,but improve it in the long run.This paper then evaluates China's financial opening policy by introducing an interaction term.Finally,using the sub-samples regression method,it is verified that the negative effects of financial openness may be related to insufficient entry levels of foreign banks,insufficient government supervision and competition in the banking industry.This paper also operate a robustness test by using the technical efficiency values calculated by the Stochastic Frontier Analysis(SFA).Above all,this article makes four suggestions: Firstly,China should promote financial openness actively and steadily and consider it as a long-term policy;secondly,foreign banks should be encouraged to enter the domestic market and we should improve their markets access conditions;thirdly,the market structure of banks should be optimized,the competition intensity of banks should be enhanced,and a fair and just banking competition environment should be established;finally,we should attach importance to the role of government supervision and correct the wrong tendency of the market in time.