Factors Affecting Foreign Banks Direct Investment In China

Entering the age of globalization with frequent capital flows, multi-nationalbanks increasingly have direct investment in various places around the world. As thelargest developing country, China has attracted many foreign banks to set up branches.Since Dec.11th,2006, when the country began to allow foreign banks to transfer theirChinese branches into local incorporation, cancel restraints of ownership andmanagement right on foreign banks and grant them with national treatment,investment in China by foreign banks have shown dramatic increase. In this context, itis of great significance to understand factors on foreign banks’ investment in China,which will not only help us learn the reason why foreign banks invest in China butalso draw on their experience for our own development to expand worldwide.The essay consists of5chapters. In the first chapter, the author mainly describedthe research background and purpose of the selected topic and proposed the researchcontent, framework and major innovation through analysis of current research onforeign banks’ direct investment; in the second chapter, the author focused onstudying and commenting bibliographies based on "clientele effect","internalizationtheory","international production compromise theory", etc.; the third chapteranalyzed the development history and features of foreign banks in China; the fourthchapter centered on empirical study, which is the core. The author carried outempirical study on factors on foreign banks’ direct investment in China throughestablishing empirical models; the fifth chapter highlighted research conclusion andlimit. According to the result of empirical model, the conclusion is made. In addition,the author further analyzed the limit of the essay and pointed out the followingresearch orientation.Based on the "international production compromise theory" as the framework,the essay built empirical model, which proved the factors on foreign banks’ directinvestment in China from2005to2012. The sample banks refer to the30foreignbanks registered in China. The result showed advantage in ownership and locationcould help explain the increase of direct investment from foreign banks. Thus, theauthor believes the country could further the location advantage to attract moreforeign banks; at macro-level, the country could enhance the policy guidance andregular supervision on foreign banks’ entrance so as to attract investment fromhigh-quality financial agencies; at micro-level, our country’s commercial banksshould draw on the multi-national’ experience, so as to implement the "going global" strategy and actively carry out direct overseas investment.