Foreign Capital Into China's Banking Industry Research

Along with the deepening of economic reforming and opening up and financial freedom of China, the entry of foreign capital has been speeding up and developed to a deeper depth. According to the promise to WTO, in September 2006, China should open totally the bank door to the foreign capital. At that time, the limit for foreign capital to place, operation and customers will be canceled step by step. This will have au austere challenge for banking in our country, moreover have a momentous effect on our finance and economics. Based on this, it will be of theoretical and real importance for economic reforming and healthy banking development to investigate the effect of foreign capital on banking in China and discuss the corresponding strategies.In the present investigation, combined the qualitative and quantitative analysis method, the effect of the entry of foreign capital on our banking will be studied and analyzed. Firstly, the effect of foreign capital was theoretically analyzed. The introduction of foreign capital has two sides: one, the entry of foreign capital will accelerate the development and perfection of China banking. This will be beneficial to attracting more direct foreign investment, introducing advanced technology and management experience, increasing the banking working efficient in China, and speeding up economic innovation and increasing social welfare. On the other side, the entry of foreign capital will bring out tremendous challenge for our banking. The entry of foreign capital could lead to the following undesirable results: brain and customers drain, being raped intermediate operation with small risk, low cost and high profit, influencing the stable and healthy circulation of banking system in China, challenging our financial monitoring system and impacting our banking system. Secondly, by adopting econometricial analysis method, the effect of both the ratio between foreign bank capital and China sample bank and the ratio of the business branch amounts of foreign bank and China sample bank on our banking, income and cost status was analyzed. Based on the analysis results, it could be concluded that the net interest income rate, non-interest income rate, earning before tax rate and overhead rate will be increased along with the entry of foreign capital. On the other hand, it has no obvious effect on the net interest income. Finally, The author pointed out the answering strategies: 1) China bank should grasp the time in increasing the comprehensive competitive ability and speed up the developing steps on the reforming basis. 2) the supervising department should take up the corresponding policy and statute to create the external conditions suitable for development of both China and foreign capital and set up strong supervising system, by this way to maintain the development of our total banking system. 3) as a whole, China government should progressively advance the process for the opening our banking door, to avoid the overloaded dependence on the foreign capital with a possible result of the controlling right on economy.