The Research Of Multinational Bank’s Entry Mode In China

The foreign direct investment in China has a long history. The first thing the multinational companies entering the Chinese market need to do is choosing the most suitable entry mode. Different entry mode also affects its management, development and business performance in China. This article will focus on the entry mode selection in the banking sector. According to the traditional division by experts and academics, and the Chinese regulation, it will be mainly divided into two types. One is greenfield investment. The multinational bank can have a full control of the subsidiary. The other is minority equity investment. The multinational bank take part in Chinese banks less than 20% of shares.With the gradual opening up of Chinese Banking System, multinational banks developed a lot from 2002 to 2007. Although there are still many restrictions in multinational banks operating, with the relevant provisions of WTO putting into effect since 2007, multinational banks have been allowed to obtain more operating licenses. Their asset scale increased more rapidly. From the analysis, greenfield investment is still the main way for multinational bank entering China, but minority equity investment is becoming an important trend. More and more multinational banks take it as a strategic or a financial investment. By comparing the motivation, advantage and disadvantage of the greenfield and minority equity investment, we found the most influential factor of entry mode choice is the policy and supervision. Then, this paper selects the Standard Chartered Bank as a case to analyze its entry mode. The Standard Chartered Bank entered the Chinese banking market with both entry modes. It has already established a relatively mature layout by greenfield. By entering with minority equity investment, it accelerated its localization and market share.At last, we provide several suggestions for multinational banks entering China, the supervision policy, and the OFDI of Chinese banks.