Temptations And Risks Of Foreign Banks' Investment In Chinese Banks

This paper is mainly a research into the advantages and disadvantages of foreign banks'investment, particularly foreign stakes, in Chinese banks. The paper begins with an overview of Chinese banking system. Some of the disadvantages Chinese banks have are discussed for a comparison with foreign banks. China's WTO entry has brought unprecedented opportunities and challenges to Chinese banks. The paper suggests that Chinese banks should bring in foreign strategic investors. A great number of examples have been collected and analyzed to show the tendency and feasibility of foreign stake acquisition. Three key points in the acquisition process have been carefully studied. The paper proposes ways to solve the problems arising from such acquisition. Foreign stakes, while encouraged, should be viewed with caution by both Chinese and foreign participants.This paper is divided into seven parts. The thesis topic and background information are explained in the first part. The second part deals with the theories on which this paper is based. The third part describes the current banking system in China. The fourth part analyzes the opportunities and challenges that face China's banking industry after its entry into the WTO and points out the urgency of banking reform on its part. The fifth part discusses, in detail, foreign stake acquisition of Chinese banks, explaining the relationship between foreign stakes and Chinese banking reform. Ways to address the problems involved in the acquisition and warnings against haste and rash decisions are contained in the sixth part of this paper. The seventh part is the conclusion.