Influence of foreign banks entry into China on the performance of efficiency in the Chinese banking industry

Abstract

With China's economic reform and opening up and deepening of financial liberalization, the entry of foreign banks into China's banking industry has continued to accelerate in speed and develop in depth. The study of the impact of foreign investment on China's banking sector operational efficiency will make a theoretical and practical difference on deepening the reform of the banking industry and improving the development of the banking industry. This study carried out an analysis of the impact of foreign bank entry on the Chinese banking industry and described its positive and negative effects. It further selected the panel data from14 the banks that dominate the Chinese banking market from 1998 to 2007 to construct a panel data model. It then analyzed the impact mechanism of foreign bank entry on the efficiency of China's banking sector through regression analysis. With a comparative analysis and empirical research methods, this study examined the impact mechanism of foreign bank entry on the operational efficiency in banking sector.