Abstract of thesis entitled “Analysis on the Efficiency of China’s Banking Industry and the Influencing Factors”, submitted by Wang Yufei (M-B0-5636-6) for the degree of master of Social Sciences in Economics at the University of Macau in June 2012. The resent 2008 global financial tsunami highlights the importance of a sound financial system for smooth economic activities. As the main supply channel for indirect financing, in the economies around the world, banks play an important role in channeling funds from savings to investment (Beck, Demirguc-Kunt and Levine, 2007). With ongoing market economy reforms, China's banking industry not only faces challenges and risks from the changing global and domestic environment, but also undergoes continuous reforms of their own institutions. Whether a bank is efficient and can resist risks have become issues of common concern to financial regulators and market economic entities. Therefore, this thesis intends to evaluate the overall economic efficiency of China’s national joint-stock commercial banks and city-level commercial banks, and find out the influencing factors of economic efficiency. Panel data of national joint-stock commercial banks and city-level commercial banks are used for the period of 1994 to 2010 and 2000 to 2010 respectively. The DEA analysis shows that the average economic efficiency of state-owned commercial banks, joint-stock commercial banks and city commercial banks are 0.825, 0.895 and 0.552 respectively. The causes of economic inefficiency in national joint-stock commercial banks and city commercial banks are different. The economic inefficiency of the national joint-stock commercial banks are mainly caused by technical inefficiency. Furthermore, the technical ii inefficiency of national joint-stock commercial banks is mainly caused by scale inefficiency. The economic inefficiency of the city commercial banks mainly results from allocative inefficiency. Previous studies analyzed the impact of one or two aspects of bank’s characteristics or those of the banking industry on banking efficiency. This thesis tries to comprehensively study the impact of (1) the characteristics of individual banks, (2) the characteristics of the whole banking industry and (3) macroeconomic factors on banking efficiency. The regression analysis shows that (1) the scale of bank’s assets, the ratio of capital adequacy, the ratio of loans to total assets, bad loan ratios, the ratio of net interest income to operating income, operating expense ratio, (2) the market share of loans, Herfindahl-Hirschman index, the proportion of state ownership of bank, (3) the growth rate of GDP, CPI, city residents’ disposable income per capita and fiscal income have significant effects on bank’s economic efficiency. Especially, we explore the effects of bank’s asset structure, bank’s equity nature, local residents’ income and government’s financial position on China’s banking system, which were not considered in previous studies. In particular, the ratio of loans to total assets has negative effect on the efficiency of national joint-stock commercial banks and has positive effect on the efficiency of city commercial banks. The obvious negative effect of the increasing state-owned equity demonstrates that the state ownership worsens bank’s efficiency. The positive development of the macroeconomic environment encourages bank’s efficiency. A sound financial income of the local government improves the efficiency of banks.