The Chinese Banking System:the Penetration Strategies For Foreign Banks

The recent financial turmoil has shook the financial world and financial institutions increasingly look at emerging countries as market to expand their business. China with its double digit economic growth and rapid development in the financial industries, as well as its huge population, is listed number one emerging market to expand in. The number of international financial institutions grows dramatically after the opening-up of the Chinese market and the entrance of China into WTO. Moreover, Shanghai is globally recognized as an important financial center, not only in the Asia pacific area, but also on the international level.My academic experience in one of the best universities in China and in Italy, along with my working experience in one of the largest Italian banking institution in Shanghai, gave me the opportunity to study the Chinese banking system and the behavior of foreign banks in the Chinese market. Therefore, I will like to analyze the structure of the Chinese banking system, its regulations and how foreign banks could take advantage of those specific characteristics and formulate a penetration strategy.The methodology used in the dissertation includes both the study of working papers and reports from banking institutions, as well as the interpretation of interview data collected from people from different backgrounds and working experiences during my stay in Shanghai.In particular, the first chapter will be focused on the evolution and the development of the banking system through the analysis of the regulations and reforms adopted by the Chinese government in recent years. Subsequently, a deeper analysis will be made of the banking industry through its market segmentation and the analysis of banking institutions operating in the industry, as well as, highlighting the behavior and the performances of foreign banks.The second chapter will be concentrated on the current financial regulation and the role of supervision agencies such as:the Chinese central bank, People’s Bank of China, and the most important banking regulatory body, Chinese Banking Regulatory Commission. In addition, a special attention will be given to the laws that regulate the business activities and the establishment of foreign banks in China.The third chapter is a study made on the different theories of banking internationalization and the identification of the penetration strategies adopted by foreign banks in their expansion in the Chinese market. Especially, I will try to combine the different theories in order to find the best way to explain this phenomena. Moreover, an analysis of some specific issues such as "why, how and where entering in the Chinese banking industry" will be added in this chapter.In the fourth chapter, I will bring an actual example of UniCredit Group bank in China. UniCredit Group bank, in the early90s, was one of the first Italian bank to establish an operating branch in China, although at that time it was still very difficult to enter into the market due to the low development of this specific industry and the lack of regulations. In this section I will analyze its strategy and its business activities focusing on the operating branch in Shanghai.