A Research On The Transnational M&A Of Chinese Banking Industry

In accordance with the pledge to the WTO, China opened the financial industry comprehensively in December, 2006. The Foreign banks entered massively, brought huge impact on the Chinese banking industry. On the other hand, economic globalization and financial integration make Chinese banking industry face enormous challenges. We must speed up the pace to"going out", carry on the foreign expansion, stride to the international development.The research on transnational M&A is very limited in China, especially lack of the comprehensive study after the financial industry opening, under the new realistic background. This is the key point of this paper, considering international and domestic situation, taking the theories as the foundation, analyzing the Western country's M&A history, focusing on the transnational M&A cases of Chinese banks, and last summing up the right path and the exist problems.This article has a total of five parts:The first part analyzes the basic theory of M&A. First, introduce the definition and the fundamental types. Also, study the applicability of the enterprise M&A theory to banks. Mainly involve the theories such as: Capital concentration theory, which is the first theory to explain enterprise M&A, also has the significant meaning to the banks; Efficiency theory, which includes many branches, like management of synergies theory, operating synergies theory, financial synergies theory and diversification theory; Transaction cost theory, proposes the reason of M&A is to reduce transaction cost; Market power theory, thinking the M&A can reduce the competitors, increase market share, obtain the monopoly profits; The value underestimate theory, thinks when enterprise's market value is lower than the true value or the potential value, the M&A will happen; The strategic development and adjustment theory, can give a good explanation to banks'M&A behavior.The second part summarizes the motive of Chinese banks expanding overseas: Enterprise's internationalization is the basic reason to urge our country's banks expand overseas; Overseas expansion is the rapid way to strengthen the capital of Chinese banks; The internationalization is the intrinsic demand of our country's banking industry; The international capital of the banks decided the international management. The international development is the important way to disperse the banks'operational risk; Domestic and global financial environment urge Chinese banks expanding overseas. In domestic and international situation aspect, first of all point out that Chinese government actively encourages the enterprises to develop overseas;Next, the subprime lending crisis provides a good opportunity for Chinese banks'foreign investment. Finally, the overseas development can seek new profit growth point when China is using the tightening monetary policy, also the appreciation of RMB reduces the cost of the overseas development, that stimulates the transnational M&A.The third part explains the M&A experience of western developed countries and give us some inspirations. Western countries have a long history of M&A which we can learn from it. There are three M&A tides in global financial industry which play a crucial role to the development of financial industry. In the third M&A tide, the transnational M&A become one of most important tendencies. Western nations'transnational M&A experience provide a good suggestion about how to choose the market and the hot spot which have already shift to the emerging markets. On the other hand, we can learn how to pick the right time. The first-class banks chose the time of financial crisis, taken use of such time to get preferential policy.China has already become a hot spot of investment. We should learn the way how foreign banks entered China. They chose to hold part of shares or as the strategic investor. By this way, they constructed good strategy cooperation, obtained huge profit and also built the solid foundation for the further developmentThe fourth part is the key point of this article. It focuses on summing cases that had occurred. By analyzing the cases, we can obtain the enlightenment which is helpful to Chinese banking industry: First, choose the right pattern of expanding overseas. Compare the M&A with newly set up from the cost, localized management, brand effect, synergies, the expanding speed and in terms of revenue, the withdrawal mechanism altogether six aspects, we can draw the conclusion that M&A is the better choice. Second, in accordance with its own development plan, pick the right market. There are two ideas: one is to choose the emerging market. It can satisfy the custom and the business needs. It also can bring high returns, separate management risk and form a mutually complementary relationship. Another is choosing the developed countries as the target which will obtain the advantageous strategic cooperation status and accumulate the relevant experience. Third, choose the reasonable target of M&A. It should think about the Chinese banks own conditions, consider the market situation, comprehensively evaluate the target company. Fourth, pay attention to political risk and legal risk in transnational M&A.The fifth part puts forward the problems during the developing and addresses the methods to solve them. There are still many problems in the course of developing. First is to continue the bank reform to enhance the competitive ability. Next is necessary to know their own plan clearly during developing process. Don't duplicate the successful experience blindly. Finally, strengthen study about the knowledge of M&A, cultivate the related talented person, accumulate the experience on M&A, raise international developing capability.This paper bases on the theories, from the new angle, combines the current domestic and international situation, proposes the necessary motive of Chinese banking industry expanding overseas, takes the successful case as the foundation, quotes the latest data, summarizes the M&A is the superior pattern for expanding overseas. Provide the advantageous enlightenment for Chinese banks, enable them to accomplish the international developing as soon as possible, to realize the global developing.