Foreign Banks Into The Competitiveness Of The Banking System Of The Host Country Study

Dec 11th, 2006, Chinese banking has fully opened to foreign commercial banks, which means National Treatment has been offered to foreign commercial banks with non-restriction of operation rights, location and business establishment modes. Chinese commercial banks have been receiving direct competitive shocks from foreign commercial banks. Certainly, it is true that foreign bank entry is a "two blades sword". For one thing, foreign bank entry improves the development and perfection of financial market, etc. For another, foreign bank entry also is able to bring some negative affects such as increase the banking regulative and controlling difficulty and bring some impact to domestic banks. So it is the most important thing to research and enhance the competitiveness of domestic banking.By employing the research method of combining theory with practice, and by utilizing the principles of economics finance, this paper borrows the experience of some developing countries and notices the newest development of foreign banks in china and closely in china is explored. Moreover, I also provide some suggestions in order to prepare well about foreign bank entry.Firstly, this paper using demonstration studies the effect of foreign bank entry on domestic banking competitiveness. This paper using the panel data of 20 developing countries studies the influence of foreign bank entry on banking competitiveness (growth rate of deposit, growth rate of lend, growth rate of net interest income, spread, asset quality and the power of discharge) and draws the experiential conclusion:(1) Foreign bank entry does not cause falling of the deposit of domestic banking;(2) Foreign bank entry has much influence on lending market and profit growth, but this influence can force the reform and development of domestic banking ;(3) Foreign bank entry decreases the spread of domestic banking, and this means the competitiveness of domestic banking increase.(4) Foreign bank entry decreases the number of customs of high quality ,so that decreases the asset quality of Chinese domestic banks.(5) Foreign bank entry does not decrease the power of discharge of Chinese domestic banks.Secondly, this paper describers the current situation and the development history of foreign banks and Chinese domestic banks. Besides, this paper analyzes the advantage and the disadvantage of the foreign commercial banks and the Chinese commercial banks.Thirdly, this paper divides the development history of foreign banks in china into two periods with china's accession into WTO as a watershed, analyzes, deduces and summarizes the development and evolution of business and expansion strategies of foreign banks in China with case studies. Then a prediction of next moves of business and expansion strategies of foreign banks is made.At the end, considering the facts of foreign bank entry in china, I also provide some suggestions in order to prepare well about foreign bank entry.