The Impact of Foreign Bank Entry on China’s Banking Industry
|Keywords||Foreign bank entry banking industry impact empirical research|
Since 1970s, the globalization of the world economy and finance has become an irreversible trend. Most countries continue to open or to further open banking industry. According to international experience, it had shown that the entry of foreign banks produced profound impact on the banking industry of the host country. Following with the "open and reform policy" in China, foreign banks’entry into the China’s banking industry has produced a series of effects of the political hierarchy. Therefore, the study on the effect of foreign bank entry on China’s banking industry has become an important issue. Based on the modern theory and hypothesis of finance, economics and industrial organization, the author has launched an in-depth study of foreign banks’influence on China’s banking industry. By employing of comparative analysis, theoretical model and empirical study on the combination of methods, the author analyzed the influence of foreign banks entering and impact to the efficiency of Chinese banks after the mechanism. With creative modeling and empirical analysis of national data, the author proposed the strategies to reply the influence of foreign banks entry within our country, and provided a useful reference for the healthy development of China’s banking industry. The article firstly summarized the related theories about foreign capital into the banks of the host country. The author indicated the research methods, ideas and the overall framework of this article; as well ad pointed out that the innovation point. Then, the article reviewed the related studies from a different perspective within China or overseas, as well as summarized the literature of foreign bank entry on the host country. Then, the article described the development of foreign banks in China, and the ways of influence on China’s banking industry. The author formed the analysis related to the degree of foreign banks’entry to the influence on China’s banks. Mainly using industrial economics, econometrics principles, and the article analyzed the positive and negative impact of foreign banks entering to China’s banking industry. The article also conducted the comparative analysis between previous proved theoretical modeling, and improved the modeling based on China’s development of banking industry. At last, the article selected panel data about main status of 14 major domestic banks from 1999-2008 and employed the constructed economic model as well as the application Eviews5.1 software for multiple regression analysis. The empirical results indicated that the entry of foreign bank leads the reduction of profitability and innovation capability of domestic banks, and also reduced operating costs of domestic Bank. And the results also proved the positive co-relationship between the foreign banks and anti-risk capability of domestic banking industry, as well as development level of deposit and loan business of banking. The article also replied with corresponded recommendations on how to face foreign bank entry.