A Study On The Causes Of Large - Scale Reduction Of Chinese Banks By Foreign Strategic Investors After 2008

In2001, China formally joined the World Trade Organization, which began the substantive stage of development for the opening for foreign banks to enter China, and foreign banks also happens to fancy the huge market potential in China and relaxed competitive environment. After a transition period of five years, in order to enhance the competitive advantage of Chinese banks, China’s banking industry began to actively introduce foreign strategic investors and expect these strategic investors are able to bring advanced business philosophy, advanced management style, diverse products and so on.For foreign banks, China’s capital control is not entirely removed. The approval speed of foreign banks to open branches is lower than the Chinese banks. For security reasons, a number of regulatory measures limited their portfolio leverage capacity and global professional advantage. The speed of market expansion will continue to be suppressed. In terms of market access, funding sources are still at a competitive disadvantage.Therefore, the shares of Chinese banks are a shortcut to enter the Chinese market. The foreign banks can take advantage of the Chinese banks’ network and customer base, to promote the products and services of their own, thereby circumventing existing business restrictions, advance into China’s banking business, and lay the foundation of growth for the future in the Chinese market.It is in this context, foreign banks began to aggressively buy shares of Chinese banks, the arrival of foreign strategic investors also make people foreseen the Chinese banks will soon be in the near future, not only has the scale of the world bank, more cosmopolitan the strength of the big banks. The beautiful expectation for a win-win result has been extended to2008.With the arrival of the2008global financial crisis, these foreign strategic investors have massive sell-off Chinese banks’shares, for a time, it seems that the Chinese banks’shares have changed from the meat and potatoes of all men to hot potatoes.The first chapter is the introduction, the background and significance of the study, literature review, research questions, methods and frameworks, innovation and inadequacies described.In the second chapter, I list some foreign strategic investors’ buying and selling processes which had large influences at that time. Through theoretical study to explore their five possible sell-off reasons:financial difficulties, Profitable holdings, Unrealized ambitions, bearish performance, purely speculative.In the third chapter, an empirical analysis of the data obtained through the use of a logit model, in analysis, correction, and then analyze the results of the two models, the size of the Chinese banks (abbr. CB), the total return on assets (CB), the cost to income ratio (CB), loan rate (CB), the RMB exchange rate, financial leverage of the foreign strategic investors (abbr. FSI), the total return on assets (FSI), the change rate of cash flow (FSI), and being selected global systemically important banks (FSI) triggered sell-off, and these variables are significant. In this chapter, I also analyzed the differences of the empirical results with the expectation.The fourth chapter, in "Conclusion", I clarified foreign strategic investors’selling behavior is mainly due to two major factors:1. External factor is known as the global financial crisis.2. Internal reason is due to foreign strategic investors those shares in Chinese banks especially large state-owned commercial banks can not meet their aspirations as a strategic investor. In the "enlightenment" part, I gave the thinking that the strategic investors is not the only way.