China's Banking Sector And Overseas Expansion Motivation Research

Starting from the end of 2006, big Chinese banks have been continuously purchasing stakes of foreign financial institutions, further committing themselves in overseas expansion, accompanied by the ongoing domestic financial reform, opening-up of the financial sector and listing of more domestic banks. This study aims to reveal the motives behind those expansions under such dynamic context. For this purpose, the paper first analyzed the current situation of the domestic banking industry, together with all the recent internationalization activities. Combining both theoretical guidelines and empirical results from existing researches, together with a consideration of Chinese characteristics, three groups of hypotheses - motives concerning characteristics of banks themselves, characteristics of the home country, and economic relationship between country of origin and country of destination - are tested by separate regression models. The overseas expansion of the Chinese banks are found both significantly and positively related to the size of the bank, the presence of foreign banks in the domestic market, the volume of bilateral trade between China and the host countries, the foreign direct investment from non-financial Chinese companies in the host countries. It is therefore concluded that Chinese banks' oversea expansion is a result of their own growth, their reactions to foreign competition in the domestic market and their strategic consideration of serving domestic clients abroad. Responsive managerial suggestions in order to take advantage of the current situation, thus improving the internationalization activities of the Chinese banks are then discussed.