Foreign Banks To Enter A Strategic Study Of China's Banking Industry

Joinning WTO not only provides China with opportunities but also challenges. According to China's commitment to WTO , at the end of 2006, foreign banks has had the same opportunities to step into China market, which presents tremendous effect to the domestic banks of China, positively and negatively.The strategy of the market access of foreign banks bases on several economic theories,such as monopolistic advantage theory.Experienced two phases in China, foreign banks are now right into the third phase on their way to China's market. Owning to financial service liberalization and as reforms in state-owned banks being developed and deepened, China's banking industry becomes more and more open to the outside world. The openning policy is constructed under the constrution of two principles: to open the banking industry step by step coordinating with the reform of financial system; to regulate the financial market more prudentially while limiting foreign banks less and less.Generally speaking, in addition to the joint venture banks, foreign banks can also be expanded by establishing representative institutions or branch banks as well as subsidiary banks in a market abroad. Take China market for example, transnational banks like to access here by either transnational M&A or to invest new estabilishment in China taking the cost and efficiency into account. Sharing equities with domestic commercial banks may just be the temporary measure for a foreign bank to persuit its max profits. The Bank of America is an illustrating example for the way how a foreign bank expands into China.When location is regarded, foreign banks usually consider coastal cities firstly. Because when choosing location, they take China's openning policy into consideration. Meanwhile, local economic enviroment and clients are aslo essential factors.Foreign banks bring both effective management and high quality services to China market, which set up good examples for domestic commercial banks. However, as all companies persuit max profits, fights for controlling the market will surely become more and more severe. Many Chinese clients with high quality, leave domestic banks and go to foreign banks.The big cake, China market, may be newly divided again. In this case, my sugge三tion is that our government should strengthen the regulations on foreign banks. Domestic commercial banks should build up new operation ideas.At the same time, financial innovation should not be ignored either.