Study On The Development Strategy Of Foreign Banks In China

While foreign banks have been participating in China for many years, they have been shackled with strict limitation on the number of branches they can set up and the type of business they can conduct. Nevertheless, during the 5 years after China's accession to the World Trade Organization (WTO), China is honoring its WTO commitment on opening the banking sector to a great extent while foreign banks have been benefiting from this with considerable achievements being made up to now. Full opening of China's financial market to foreign financial institutions is expected after year 2006, a year so crucial to foreign banks that already have presences in China or intend to enter China market. Under such macro environment, this paper analyzes and summarizes the future development strategy of foreign banks in China.The practical significance of this paper lies in, from the viewpoint of foreign banks, the initiative for exploring business in China can be traced and the future development strategy can be referred; for domestic banks, this paper helps them to well position themselves and know better about their competitors so as to adjust or adopt proper countermeasures.The first chapter of this paper focuses on the existing development status and future development trend of foreign banks in China: the network is increasing to capture more market share of retail and corporate business, the business scale is enlarging with more stakes in local banks being acquired, the branch network is mainly distributed in cities or regions where economic growth are higher than average.The second chapter compares the advantages and disadvantages of foreign banks with those of domestic banks by applying the FDI theory of service into banking industry.The third chapter mentions about the competition and cooperation between foreign banks and domestic banks. Firstly, it summarizes the segments which might cause severe competition between them, such as recruitment of experienced staffs, exploration of good customers, promotion of non-interest income business, etc.; secondly, it reasons that cooperation between foreign banks and domestic banks is more important than competition by applying relevant theories and citing some examples.The fourth chapter discusses the mid-term development strategies of foreign banks in China and how will they enforce these strategies, that is, to focus on the business segments which foreign banks have much advantages in, such as personal banking, non-interest income business, etc. The just-launched QDII business will further pave the way for the mid-term development of foreign banks. In order to capture more local enterprises, the promotion method of"Customer Satisfaction"concerning quality service should be adopted by foreign banks as an on-going measure.In conclusion, with an aim to demonstrate the possible business strategy to be adopted by foreign banks in China, this paper tries to give a clear picture of the historical and current development of foreign banks, as well as the advantages and disadvantages of both foreign banks and domestic banks by making use of the relevant theories and examples. In the long run, competition as well as corporation between these two parties will benefit the development of themselves and the development of the financial market of China as well.