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Efficiency Spillovers of Foreign Direct Investment in the Chinese Banking System

Ziliang Deng (), Honglin Guo and Guilan Kong

Global Economic Review, 2011, vol. 40, issue 2, 179-191

Abstract: This research suggests that the efficiency spillovers of foreign banks in China have played an integral role in transforming the fragile banking system into a relatively robust one. Stochastic frontier analysis is employed to analyze the efficiency of the Chinese banks during 2001-2007 with the data of 126 banks. The study suggests that the presence of foreign banks has helped improve the overall profitability of the Chinese banks and has also effectively constrained the scale of loans. The findings manifest the importance of efficiency spillovers which can be brought to an economy in transition by cautious financial liberalization.

Keywords: Commercial bank; efficiency; spillover; foreign direct investment; stochastic frontier analysis (search for similar items in EconPapers)
Date: 2011
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Handle: RePEc:taf:glecrv:v:40:y:2011:i:2:p:179-191