Banking Sector FDI In China: Development, Prospects And Impact On The Domestic Economy

The paper analyzes the development and prospects of foreign bank penetration in China and its influence on the stability of bank credit. It measured the activities of foreign banks within China in the form of percentage share with respect to total assets of all banking institutions. By combining data from National Bureau of Statistics of China (NBSC), China Banking Regulatory Commission (CBRC), China Banking Association (CBA) and other sources into a unique database the paper is able to make a clear distinction between these two kinds of activities: That the relative importance of foreign banks in China has increased considerably during recent years. However, with respect to the numerous challenges faced by foreign banks and their operation in China, the paper does not find evidence of foreign banks deserting China, even during adverse economic times. Although the percentage share of foreign banks did decrease during some periods, the results show that foreign banks acquired new local subsidiaries or expanded the credit supply of existing subsidiaries at the same time.