The Influence And Counter Measures Of Foreign Banks' Enters Into China

As the development of the financial globalization and the past of 5 years transition period after China joining into WTO, the time of foreign banks fully competing with China banks arrives. China economy grows so fast and China participates actively in economic globalization. In such a case, the entry of foreign banks brings not only the chances but also the challenges for domestic banks. To achieve the win-win result between foreign banks and domestic banks in such keen competition is so important for the growing and steadying of China economy. So the paper analyses the current situation of foreign banks in China and the impact after the fully entry of foreign banks. Further more, the paper suggests how to response to the competition and how to weaken the negative influence.Now foreign banks develop speedy and actively in China. In 1979, the first representative office of foreign banks was approved to set up in China. After 1979, most of foreign banks were set up in Yangtze River delta, Chu Chiang Delta and Bohai Economic Rim, and then in the capital of a province or other developed cities. The number is increasing and the rank is higher. Now operate status of foreign banks is smooth. The capital, provision and liquidity are adequate. The quality of asset is good and non-performing loan is low. After 2006, the scope of their business goes to RMB retail business. They begin to compete with local banks in all aspects. At the same time, more and more foreign banks manage domestic banks as an equity participant or by the way of merger. The ability of creation of foreign banks is higher than local banks. They pay more attention to subdivide market and the centralization of management.On one hand, the entry of foreign banks brings some active impacts on China banking. It accelerates the reform of China banking. Now state-owned banks have changed to the modern joint-stock commercial bank and the competition ability of them is improved. At the same time, foreign banks come with the advanced technology, management experience and service sense. They improve the effective competition in the banking system. As a channel, they help China achieve more foreign investment and get more funds from international market. Because we can get the experience and technology of international operation form foreign banks in the competition and corporation, they also help domestic banks enter into the international market. On the other hand, there are some negative impacts such as disorganize the market, increasing the flows of idle money and transmitting the economic fluctuation to China from their own countries. All brings the tremendous challenge to the stability of China financial market and system. The entry makes the financial Regulatory become complicated and difficult. It also weakens the power of macroscopic economic policy in China.The world financial crisis affects China banking. But the situation is not very serious because of the good profitability, adequate rate of capital and steady status of assets of domestic banks. The world economy grows slowly. But foreign banks in China are still enlarging their branches and business actively. The action shows their confidence in China economy.Domestic banks should take countermeasures and strategies to the challenge of foreign bank entry. From the long-time angle of view, domestic banks have to keep the most of the conventional advantages and perfect them continuously. Also they should reinforce the corporation with foreign banks in order to achieve the improvement actually. Meanwhile, China banking should strength the Regulatory and should actively participate in the international financial market. In the face of the world financial crisis, China banking should follow government economic policy actively,regard the financial credit and innovation cautiously and develop Regulatory together with financial innovation.