Research, Organizational Forms Of Foreign Banks In China

With the development of globalization, the relationships between countries are becoming closer, and all banks seize these opportunities to step up the layout around the world. China opened the door of the banking industry in the early of 1980's, and has gone for a long time. Especially, since December 11, 2006, Chinese government has cancelled the restrictions on RMB businesses and customers, and has given the foreign banks national treatment.At the process of opening up the financial industry, China has fulfilled the commitment of opening banking industry gradually, so the foreign banks in China have developed quickly. After two decades of exploration in China, these foreign banks have been more profound understanding and gradually formed a clear and complete business strategy. And they have more choices about their organizational forms, such as representative office, branch, Subsidiary and so on. Against this background, this paper focuses on the factors which influence the foreign banks to choose their organizational forms- representative office, branch, Subsidiary.Firstly, we examine the factors influencing foreign banks' organizational form between representative office and branch. The empirical results tell us that on the whole, the establishment of representative office is affected by foreign direct investment (FDI), the import and export volume, and the policy factors of China's WTO accession in 2001. While the establishment of branch is mainly influenced by FDI, import and export volume and interest spreads. From the further research, we find that the establishment of organizational form is related to FDI between the two countries, import and export volume between the two countries, the distance between the two countries, and per capita income of home countries. These factors all have a great effect on the establishment of representative office, while only the first two factors have affected the establishment of branch. These empirical studies have proved once again the follow-up principle. However, these factors have different influences on different organizational forms.Secondly, this paper also examines the factors which influence the choice between branch and Subsidiary. These factors include different home countries, the different entering time, the different bank strategies, the location factors, and the impact of the global financial crisis, and so on.This article focuses on the factors influencing the choice of different organizational forms of the foreign banks in China. I hope this research could lead to further academic studies, and could provide some suggestions to the close associates.