Research On The Motivation And Effects Of Foreign Banks' Share Investment

China has strengthened the opening policy of banking industry after its entry into the WTO. Seizing this opportunity, some foreign banks have further scaled up their business in China by purchasing the shares from Chinese commercial banks. By the end of 2007, 33 foreign financial institutions had held the shares of 25 Chinese commercial banks including three state-owned ones and the total amount of investment had mounted to 21.25 billion dollars. The motivation of foreign banks' scale expansion and thus the consequent influence become the subjects of wide study. In order to hold the proper view of this phenomenon and to accordingly form good guidelines in the policy-making for the development of China's banking industry, it's necessary to probe into those shares investment and make deep study on it.Having discovered, from different perspectives, the advantages and disadvantages of this share-purchase to the growing of national banking industry, the paper foresees the future trend of this behavior in banking area and provides the suggestions on how to deal with it. The whole thesis is unfolded in the following aspects: relevant research on transnational M&A, the current expansion of foreign banks in China and its features, the motivation and possible effects, future development and China's corresponding measures.Adopting different theories, case study and empirical study in economics as analyzing approaches, this paper systematically analyzes the share-purchase of foreign banks and clearly reveals its nature and influence. Compared with previous studies, it's the first time that thorough and systematic research has been made on this phenomenon. Furthermore, the empirical study can be regarded as a new and effective approach in this field. In better understanding the nature and effect of this financial behavior, Chinese banking industry can reform and develop itself to survive the competition.