Research On The Effects Of Foreign Bank Penetrating On The Stability Of China Banking System

In the past few years, China has been loosing entry restrictions for foreign banks. Until December of 2006, China banking has been wholly open to other countries. Meanwhile, foreign banks that have long coveted huge market of China are speeding up localization process, causing radical impact on China market; even the global financial crisis in 2008 can not stop the expanding pace of foreign banks in China. In China, banks are core of financial system, the stability of banking system is crucial to whether China economy can realize sustained and rapid development. What influence may foreign banks bring to stability of China banking system in the process of all-round penetration has become the problem which arouses wide concern in academia.Current research is mainly based on two perspectives: timing and staged research. This paper uses"stage theory"as a guide, adopts combination of theoretical and empirical approach to do exploratory study. Selecting statistics from 1999 to 2008 as sample, based on instability inherent formation mechanism, this paper builds monthly index of banking system stability (BSSMI) using method of index analysis, and then carries out stepwise regression of foreign banks penetration degree and other variables influencing stability of banking system upon BSSMI, studies the change and evolution process of influence foreign banks penetration brings to stability of our country banking system. This paper finds out that, in the opening process of banking, with penetration of foreign banks, evolution process of banking system stability roughly appears reverse"U"shape, basically consistent with stage theory. In addition, during the crisis, micro-strategies foreign banks adopt in China are important factors that influence stability of banking system.