Research On Performance Of Introducing Foreign Strategic Investors By Chinese Bank

In the history of the development process of Chinese banking system, Chinese commercial banks gradually stripped of the policy function, which was mainly reflected in the establishment of three policy banks taken over the policy-related business from commercial banks. At the same time, the main function of commercial banks has changed from the credit and payment intermediaries to a full range of financial services and risk management, also played a role to guide the rapid economic development. With the development of Chinese commercial banks, the bank’s function has improved steadily, which reflect the great achievements of the reform and development of Chinese banking in the past three decades.Compared with the mature markets of Europe and the United States, Chinese banking system still has a lot of problems. The current situation of Chinese banking system is that the four state-owned commercial banks accounts for most of the credit market, which leads to lack of competition in the entire banking market and the overall weak competitiveness of small and medium-sized banks. So, the concentration is too high in Chinese banking system. Some SMEs are difficult to get loans because of weak competition in the credit market.This paper first of all reviewed a variety of theories and literature about the introduction of foreign strategic investors and the ownership balance. Secondly, the author summarized the requirements of the regulators on introducing foreign strategic investors by commercial banks, reviewed the process of introducing foreign strategic investors, and analyzed the benefits from foreign strategic investors. Thirdly, using the method of factor analysis, the author scored operational effectiveness of the33sample banks, by selecting the nine financial ratios representative of profitability, solvency, long-term development and risk control capability. Finally, the main conclusions are including that the performance of the banks introducing foreign strategic investors are better than other banks, the operational effectiveness of the state-controlled banks better than non-state- controlled banks, the operating efficiency of banks with a high proportion of foreign shareholders better than those with a law proportion.Through the above analysis, this paper presented some suggestions. First, encourage more Chinese commercial banks to introduce foreign strategic investors, so that Chinese banks and strategic investors can achieve a win-win cooperation and common development. Second, appropriately increase the proportion of foreign investment in Chinese commercial banks, at present, the average stake of the foreign investment is generally lower than20per cent of the requirements of regulators in Chinese commercial banks. However, when foreign strategic investors hold more shares, they will have more incentive to monitor the behavior of the controlling shareholder. This will help to improve the bank’s governance structure. Third, government departments should strengthen the supervision on foreign capital to enter Chinese commercial bank, allowing its investing in Chinese banks in the legal premise.