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Finance & Accounting
Pages 12 (3012 words)
Name Course Instructor Date of submission Effect of Foreign Banks on the Efficiency of Chinese Commercial Banks Findings - Data presentation/ analysis and discussion In the quest to ascertain the impact of foreign banking on Chinese Commercial Banks, it was necessary to use empirical formula rather than quantitative formula.
Market average input prices were accordingly used to determine cost and give tangible results when used in SFA. Data Presentation The figure showing changes of profit efficiency of the Chinese banking industry This figure underscores the effect of penetration of foreign banks on Chinese domestic banks. During the initial stage of market penetration, domestic banks drop or stagnant in terms of profit efficiency. This is occasioned by the need to increase investment in technology and efficient systems in order to stay competitive. These measures drive the cost upwards resulting in decreased profit margin. The trend changes to that of growth after the necessary technology and efficient systems are in place. The exponential growth face exceeds the negative impact occasioned and this in general increases profit efficiency and by extension the efficiency of the domestic banks. These results indicate that City commercial banks are the most profit efficient whilst state-owned banks being the least in terms of profit efficiency. This is a deviation from the fact that state-owned banks (SOCBs) tend to be more cost effective. The reason for this is that SOCBs tend to have higher Non-performing loans (NPLs) than City commercial banks (CCBs). ...
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