Foreign Banks Shares The Motives And Effects Of China's Banking Sector

Because of deregulation of banking industry in many countries, bank mergers & acquisitions involving foreign banks increase substantially. The motivation of foreign banks to acquire the local banks, and thus the consequent influence become the subjects of wide study. After entering into WTO, China keeps opening and reforming its banking industry, and in the past 4 years, several foreign banks have purchased the shares from Chinese banks including three state-owned banks. It's necessary to probe into those shares investment and make deep study on it in order to form good guidelines and better supervise those trades. This paper studied the share-purchase of foreign banks in China, and the possible effects, and provided the suggestions on how to deal with it. The frame of this paper is as follow: firstly, we studied the literatures about M & A by foreign banks, secondly, we reviewed the cross-border M & A of emerging markets banking system, thirdly, we looked into foreign banks'shares investment in China, then, we analyzed the motives of foreign banks to purchase the shares of domestic banks, and finally, we suggested the possible trend of these purchasing activities, and how to deal with it.Current studies on the motives of foreign banks'entry into new markets by acquiring the share of local banks are limited. We used the former studies of bank M & A and cross-border operation, and found that foreign banks tend to make cross-border M & A to gain the benefits of scale economy, cost saving, and diversification. Besides, it's a easier way for them to enter the new market. Empirical analysis of the cross-border M & A in emerging markets indicates that foreign ownership may provide important positive influences on the stability and development of the local banking systems. Then we studied the foreign banks'investment...