China's Banking International Equity Research Cooperation Problem

Equity cooporation is a very important business activitiy in the banking development. In the context of economic globalization, inter-bank cooperation in international equity is raised to a new level.With China’s financial reform and opening up, cooperation with the international banking equity have become the important force for domestic banks’ reform. Encouraged by China’s banking regulatory authorities, the major domestic commercial banks have completed the introduction of strategic investors and joint-stock reform. Practice has proved that foreign strategic investors has played a positive role in helping domestic banks to improve corporate governance, to change business philosophy, and to enhance the management level. However, large shares by strategic investors also caused a lot of controversy, such as, the value of domestic banks whether be undervalued? The State-owned assets whether be cheaply sell? Foreign share holders will not really teach the advanced management techniques? Especially after the international financial crisis, large-scale selling by foreign investors in the banks shares, some people even questioned the necessity of China’s banking reform and opening up. Therefore, it has important practical significance for the realization of China and foreign banks’ total win if we researched international equity joint, draw on international experience, and mastered the basic rules of cooperation in banking shares.The dissertation is followed by the logic of this idea:the research of banking cooperation of international equity theory, motivation and effects, international experience, domestic practice, several important questions, and suggestions. There are7sectors of this dissertation.As a introduction, chapter I describes the background and significance of the topic, incoluding the research methods, the structural arrangements and the concepts definition, and points out the innovation the shortage of this dissertation. Chapter II reviews the theory of economic globalization, financial globalization and the opening up of banking, and presents the main problems the banking equity partnership, That is, how to analyze the advantages and disadvantages of a country’s banking sector into the global market.Chapter III analyzes the purpose and effect of the bank equity cooperation, and draws a conclusion that foreign bank in developed countries taking cross-border investment is for capital profit. To different from developed countries, developing countries to open the domestic banking sector have more complex motives, some because of the domestic financial system can not provide comprehensive financial services, and some because of suffered a setback in the banking transition or in the privatization. As to the effect of cooperation in banking, we think that foreign bank’s entry will help to improve the bank’s corporate governance, enhance the bank’s performance.Chapter IV compares cooperation in bank equity between developed and developing countries by a large number of practical cases. Bank equity cooperation has a positive effect to improve the level of bank management and the ability to resist risks not only for developed countries but also for developing countries. Of course, it will take negative impact on the host country political and economic when foreign banks obtain absolute control. Therefore, it should be rational to grasp the process of cooperation and the proportion of foreign ownership.Chapter V reviews the background and related dispute of China’s bank introducing foreign investment. It draws a conclusion that the introduction of foreign capital by state-owned commercial banks, are the country’s a second best option at the time. By introduction foreign capital, state-owned commercial banks have achieved several results. For example, it has been improved in capital adequacy, asset quality and capital gains, while the risk of assets has been controlled. Of course, the improvement of management performance like above by state-owned commercial banks is the result of many factors, including government funding, bad debt spin-off, the introduction of strategic investors, public finance and other aspects. It is hard to distinguish which kind of forces play a greater role.Chapter VI, through the reduction of foreign strategic investors, it analyzes the stake proportion of strategic investors, the equity pricing and security alerts of state-owned commercial banks. First, the fundamental reason of reduction by foreign strategic investors is that the nature of strategic investors, the stake proportion and the target investor are deviated from original goal. To resolve this problem, it should improve share proportion of a single strategic investor, to introduce foreign investors with the needs. Second, by analysis of option pricing models and its affecting, it concludes that equity pricing already reflect the fair value of state-owned commercial bank in the context of specific cases. Third, to the banking equity cooperative security warning issue, it creatively designs a method how to evaluate foreign equity bank’s Impact on the financial security.Chapter VII is the concluding part of this article. By the preceding analysis, it put forward strategy selections and monitoring recommendations to China’s banking co-operation of international equity. It should develop short-term and long-term strategic framework, insist to deepen the reform of state-owned commercial banks, and expand the strategic investor’s stake on the basis of the state-controlled. Again, it should take a dynamic regulatory strategies to foreign strategic investors.