The Impact of Foreign Banks' Entry into China on the Operating Efficiency of China's Banking Industry

Abstract

Based on the sample data of 13 representative commercial banks in China from 2010 to 2019, this paper studies the impact of foreign bank entry on the efficiency of Chinese commercial banks and the optimal level of opening policies with the efficiency value calculated by DEA as the dependent variable. The results show that: there is an inverted U nonlinear relationship between the entry-degree of foreign banks and the efficiency of Chinese commercial banks, that is, under different entry degrees, the impact of foreign banks on the efficiency of Chinese commercial banks first shows positive and then negative, and there is an optimal level for the entry of foreign banks. According to the empirical results, it can be found that the continuous entry of foreign banks since 2010 has promoted the improvement of the efficiency of Chinese commercial banks. However, the entry-level of foreign banks at this stage is far below the optimal level, and foreign banks should be further introduced into China. At the end of the article, it puts forward several issues and corresponding countermeasures that should be paid attention to when improving the efficiency of Chinese commercial banks. Besides, it also summarizes the shortcomings of this article and the future research directions of the author.