Study On The Route Selection Of The Foreign Banks' Direct Investment

Along with China's entry of WTO and gradual opening of its finance industry, Foreign bank have began to invest in China extensively. For its short history, Foreign bank's direct investments are still only in their earlier stage. During this initial period, how to arrange the entry route selection, including choosing where to start new investment, through what kind of investment?—Greenfield investment or Mergers and Acquisitions. This issue has become one of strategic questions in front of Foreign banks which had or plan to invest in China. Considering the finance industry's unique characteristics, this paper takes Foreign bank as a special Multinational corporation to evolve new research,, basing on the relative theory and method, such as International direct investment theory., and is committing to study the route selection of the foreign bank's direct investment in china.In the part of research on location choice of foreign bank's direct investment, firstly, generalizes the characteristic of foreign bank's location. Integrating with financial industry's characteristic, an index system which might influence the location selection is established on the basis of relative direct investment theory including Economics of Agglomeration. It's the first time in domestic to introduce the factor of Financial Agglomeration to analyses the foreign banks'location selection, carries on the empirical analysis after introducing 16 comprehensively representative factors. A model is build for the significance analysis, and it has confirmed some overseas empirical conclusions is also suitable in China: The primary purpose of Foreign bank's direct investment is to seek the target market's existed or potential profit opportunity; The policy factor are affecting the foreign investment's location choice to a great extent. Moreover, the facator of Financial Agglomeration have a significant influence on the location selection, that's part of the reason why the Foreign bank even more favors in places such as China's local financial center like Shanghai, Beijing to carry on new investment.Meanwhile, conclusion reveals the Foreign bank's entry conformed to"the FDI pursuing hypothesis"but not proves the availability of"the Trade pursuing hypothesis".Resorting to a Factor Analysis Method, this paper makes an extraction from 16 factors which might influence location selection, and there are three main common factors obtained, which as follows, the market opportunity factor, the financial agglomeration factor and the economic position strength factor. Meanwhile, through the calculation of respective public factor score and the synthesis score, discovers the advantages and disadvantages of attracting Foreign bank's direct investment in 17 cities choosing in china and which aspect should be reinforced and strengthened in the future.In the research of Foreign bank's direct investment mode selection(Greenfield investment or Merger and Acquisition), in the basis of relevent theory, this paper profoundly and dissectively analyses the factors influencing the choice of investment model from two point of views, external environment and the Foreign bank itself. Combining the comparative analysis of two investment ways, a framework for strategic choice during foreign bank's direct investment is designed.Relying on the research about choosing where to start new investment and an appropriate way between Greenfield investment and Merger & Acquisition, disclosing some general rules and determinants during this preliminary stage, hoping this paper could make our relative governing institution and our banks have a better and deep understanding of the motivation and determinants under Foreign banks'different strategic choice for beginning new investment in China. In addition, this paper provides some useful reference and suggestions about strategic choices during worldwide initial investment for banks from China.