The Study Of Profits Getting Channel Chosen By Foreign Banks In China And Its Influencing Factors

Since China’s accession to WTO in2001, the domestic financial markets was opened gradually, our business environment and conditions for foreign banks are continually improved, and the foreign banks’strength is also increasing in China. According to the "Finance and Trade Services Agreement" that China signed when she joined the WTO, start from11December in2006, China’s banking market will be full opened, all of the ownership, operation and establishment forms which existed before for foreign banks would be abolished, the competition between Chinese banks and foreign banks will become more intense, foreign banks’ operation strategy and profit sources of access in China will be showing some new trends. Currently, there are more studied which research the impact of foreign banks’operation in China to Chinese banks performance, but the study to research the foreign banks’ channels to get their profit and the select factors of their business is relatively less. In the case of the competition of China Banking market is intensifying, studying the foreign banks’access to profits and analyzing their operating advantages will have a very important reference for the future operations of Chinese banks. Therefore, this paper will study and analyze the foreign banks’ access channels of getting profits, and on this basis to analyze the factors that affect its main selected source of profit business.First of all, this paper reviews the relevant literature and theories on banks multinational operations, finding that the studies on foreign banks in China are mostly concentrated on the impact on the host country’s banking, and the researches are basically before2007, after2007, the relevant study is relatively less. Then, studying the obtaining profits of foreign banks in China from2007will be a research point of this article.Secondly, this paper makes a comprehensive analysis of the profits getting channel of foreign banks in China. On the basis of analyzing the overall operations of foreign banks in China, we using related data of42foreign banks in China to statistical analyze their business focus and main profits sources as well as changes from year to year, discovering that the source of foreign banks in China are mainly concentrated on the traditional deposit and lending business and middle business, but to conduct banking business in China whose market-oriented interest rate is not completely, foreign banks did not chose the middle business which they have a significant advantage as their biggest source of profit, they also tend to choose the localization deposit and lending business as their source of profit. However, at the same time, they actively bring their advantages in to play, continuing to expand their intermediate business and the intermediate business’s contribution to profit, in order to occupy more middle banking business market share in China. And then, analyzing the main factors affecting the selected operation business of foreign banks in China, finding that in the process of foreign banks operating in China, when they choose the main business to get profit, they are not only affected by their own factors, but also affected by the factors as the overall environment and the regulatory authorities of host country. After analyzing the relevant factors, this paper uses the42foreign banks’data in China to establish a non-balanced panel data model to make an empirical test about the factors that affect the foreign banks in China to select the channel to obtain profit. We found that foreign banks’cost of capital rate, intermediate business capabilities, bank size, our banking supervisory authority and so on are the main factors affecting the choice of profit source business of foreign banks.Finally, on the basis of the previous text’s relevant qualitative and quantitative analysis, this article provides some proposals of channels to get profit for Chinese banks. On the one hand, for the bank itself, they should improve their core competitiveness. With the process of promoting the market-oriented interest rate and the intensifying level of banking competition, traditional deposit and lending business will certainly not bring sustained high profit for banks, Chinese banks must strengthen innovation, continue to introduce products that meet customers’demand, make intermediate business bigger and stronger. On the other hand, for the national level, we should improve the banks’external operating environment, create a fair competitive market environment and increase the supervision of foreign banks at the same time.