The Rise of Foreign Investment in China’s Banks—Taking Stock

IMF Working Papers, December 1, 2006

Source details

Authors: Lamin Y Leigh, Richard Podpiera
Publication date: December 1, 2006
Series: Working Paper No. 2006/292
Issue: 292
Volume: 2006
Pages: 14
DOI: https://doi.org/10.5089/9781451865523.001
ISBN: 9781451865523
ISSN: 1018-5941
Subject: Banking, Commercial banks, Credit, Foreign banks, Foreign direct investment
Keywords: bank, bank entry, China, commercial bank, investor, WP

Recent wave of foreign investment in China's banks and the prospects of further opening of the banking sector under the WTO agreement suggest that foreign banks are likely to play an increasingly important role in China.
Foreign bank entry patterns in China differ from most other countries:
- In most other countries foreign bank entry took the form of direct takeover or majority shareholding.
- In China, foreign investments in banks have been minority shareholdings with very limited management involvement.
The paper takes stock of foreign-bank involvement in the Chinese banking sector in the perspective of international experience.

The paper concludes that China appears to be well positioned to benefit from further opening of the banking sector to foreign investors.
International experience suggests that greater competition from and participation of foreign banks can in general bring important benefits if:
- appropriate incentives are created, and
- sufficient opportunities are created.

Source: "The Rise of Foreign Investment in China’s Banks—Taking Stock", Lamin Y Leigh and Richard Podpiera, IMF Working Papers 2006, 292 (2006).