A Study Of The Entry Mode And The Effect Of Banking FDI In China

The opening of China’s banking industry has lasted for nearly 30 years since 1980 s. Due to the significance of the banking industry to the economic development,China has adopted a gradual open-up policy,total assets of foreign investment in China’s banking industry only accounted for 1.8% of total industry’s assets at the end of 2010.Based on a brief review of the open-up history of China’s banking industry,the thesis summarized the current atatus and characteristics of banking FDI in Chian,and then analyzed the entry mode effect from different perspective.Frist,the thesis established a model to analyze the entry mode decision-making process made by the multinational bank under the assumption of maximizing the profit in a host country with the higher operation risk and the higher information asymmetry. The results indicated that the Strategic Investor was the optimal choice for multinational banks. In the case of Green Field,Subsidiary is much better than Branch for the international banks to take precaution against the operation risk in host country and excavate more profit from local market at the same time.To some degree,China’s legal-body subsidiary system is helpful for the foreign capital.Compared the profits earned by the banking FDI,the Strategic investors earned more profit than the Green-Field by now.Secend, the thesis analyzed the different entry mode effect on China’s banking industry.The literature review indicated that the entry of foreign capital or the foreign ownership was not a necessary precondition for the improvement of bank performance,the different entry mode brought about different spillover effect on local banks.The final chapter analyzed the basic open-up strategy for China’s banking industry.In vies of the international economy situatioin,the complexity of domestic economic reform and the competitiveness of domestic banks,china should adopt a more stable open-up policy.The foreign banking FDI was the only external forces in china banking reform,which can not solve everything.The performance improvement of China banking industry should depend on the Chinese overall economic reform process and the improvement of local bank’s competitiveness.