The Study On Chinese Banks’ Performance Influenced By Foreign Strategic Investors

The first part of this essay reviewed the cross-border investment banking motivation theory, property rights theory and bank efficiency theory, and introduced the academic discussion on the foreign strategic investors in the banking sector. Subsequently, we analyzed the motives. To domestic banks, foreign capital help to improve its image in the international markets, improve the capital adequacy ratio and the corporate management structure, thereby enhancing competitiveness. To foreign strategic investors, equity can share resources and local experience with local banks, get into market with the lowest cost and obtain higher economic returns. On this basis, it provided a brief background of a four-stage process of foreign capital participation in domestic banks. In this period, shares of foreign investment continue to expand. Cooperation and objects became diversified. In the third chapter, we choose 14 foreign banks. They can be divided into three groups:large state-owned commercial banks, national joint-stock commercial banks, and city commercial banks. Based on each bank’s annual financial statements data, we use the CAMEL evaluation system to examine banks’effectiveness such as capital adequacy, asset quality, management, earnings and liquidity. The results showed that the performance of state-owned commercial performance is better than that of non-state-owned ones; non-state-owned banks get more significant improvements in management and corporate governance. Further we select Bank of Communications, Industrial Bank and Bank of Ningbo as representative examples, and analyze the actual impact of foreign equity participation. Research shows that foreign strategic investors improved the banks shareholding structure and helped banks actively explore business and training professionals.China also has some problems in the process of introducing foreign strategic investors, such as "underweight incident" since 2008. Therefore, China’s banking industry should carefully examine investment institutions. Government should improve the regulation on foreign strategic investors. After the introduction of foreign strategic investors, bank should consider their own characteristics; selectively digest partner’s advanced technology and management experience to improve their competitiveness.