Determinants Of Internationalization Of Chinese Commercial Banks

After the international financial crisis in2008, the international status and economic strength of American and European countries fell, whose banks suffered heavy losses. The situation has provided a good opportunity for the international operations of China’s commercial banks. At the same time, China’s rising economic strength, increasing FDI and trade volume, the internationalization of more and more enterprises, interest rate marketization and RMB internationalization require domestic commercial banks to accelerate their internationalization pace and provide better cross-border financial services. However, compared with the world-renowned multinational banks, the current level of internationalization of China’s commercial banks is still very low. In this context, the thesis aims to study the determinants or motivations of domestic commercial banks and make some possible suggestions for their future development of internationalization.Firstly, we define the related concepts of banking internationalization, and introduce major theoretical and empirical research results to serve as the theoretical basis for this thesis. Secondly, we elaborate and compare the world’s banking internationalization process and status quo with that of China’s commercial banks to reveal our domestic commercial banks’ international stage. Then, we analyze the determinants of China’s commercial banks internationalization. They are China’s economic system and policy environment, historic opportunities brought by the international financial crisis, the banks’ asset size, international business experience and their business performance, FDI and trade volume between China and host countries and other location factors. This part is used as the practical basis for this thesis. Thirdly, according to the banking internationalization theory, previous research results and actual situation of our commercial banks internationalization, we make an empirical research on the determinants of our banks internationalization. We select seven major determinants and make two regression models, which is based on panel data. The empirical results are as follows:Among the bank’s own factors, there is a significant positive correlation between the international operation experience and the internationalization of China’s commercial banks. The asset size and operation performance of domestic commercial banks cannot explain their internationalization. However, we can expect that with the accumulation of international operation experience, both of these two determinants will play an important role in the future. Among the external factors, there is a significant positive correlation between our FDI&trade volume and the internationalization of China’s commercial banks. That means our commercial banks tend to establish branches in China’s major partners in foreign direct investment and trade. The economic development level of the host country or region is an important factor which has a positive effect on the location choice of our commercial banks internationalization. The economic openness of host country or region does not pass our empirical inspection, because of the index selection criteria. However, from a practical view, China’s commercial banks tend to enter the developed and open countries and regions.Finally, we put forward some corresponding suggestions for our commercial banks’ future international development based on the empirical study results and their actual situation of internationalization.