China Banking Foreign M & A Motives And Effects Analysis

A worldwide climax of M&A in banking industry, which firstly burst out in the 1990s, has been expanded to China. Besides the driven force of economic globalization and finance liberalization, the important point of this is the attractive market potential to the foreign investors and series of opening policies and restructuring actions issued or performed by the government that made possible to foreign investors of entering into Chinese banking market without policy limiting.Booming development of economics and globalization in various industries within China have been achieved since China firstly implemented its opening and reforming policies more than twenty years ago. Being important part of national economy, foreign invested companies have achieved great success in many industries. Considering the close connection with economy and the good foreground, the banking industry is deemed to be one of the most attractive industries to foreign investors. However, for quite a long time, it's also a limited industry to foreign companies and was controlled by the government to ensure protection of domestic industry, smooth of economy and also for the safe of national economy. In contrast to other domestic industries, the reforming and opening procedure of banking industry was started later and more steady. It was not until recently, accompanied with the growing of Chinese restructuring procedure of banking industry as well as its entry into WTO and announced its full open of banking industry that the opening steps get faster. More and more limits to the source of invest and the operating range were canceled, thus provided rare opportunities to foreign investors and lead to the fast expanding of foreign investing in Chinese banking industry, among which M&A of local banks is one of the most important and widely used way by foreign financial giants.At the first part of this article, this paper introduced the international and domestic background of M&A in banking industry, then analyzed the driven reasons of international M&A against domestic banks from aspects of economic of scale, marketing strategy and financial evaluation etc., after that, discussed the spillover effect to our country including attracting foreign funds, perfecting the property rights, improving HR resources and management level of local banks, as well as the effects on concentration degree of the industry and the management method and supervision system of the government. Based on above analysis, some suggestion was given in the last part of this article concerning the development of local banking industry and the improving of related policies.