Study On The Overseas Expansion Of Chinese Banks

After Chinese large commercial Banks listed on the share reform, tend to improve corporate governance, management level achieved significantly improved, capital abundant. Benefited the sustained and rapid development of economy, the Chinese banking sector profit growth and scale in the top of the global banking industry, with the foundation of overseas expansion and strength. U.S. subprime crisis and the European sovereign debt crisis caused developed banking sector suffered a severe blow, bank valuations decline. In the post crisis era, western countries generally reduces the foreign banks to enter the threshold, for Chinese Banks to expand overseas provides a rare window period. In recent years, some progress has been made in Chinese Banks to expand overseas, the number of overseas branches increasing. But relative to the large global banks such as Citigroup and HSBC, Chinese funded bank Overseas assets ratio, profitability of foreign institutions, the degree of Business diversification and localization, there is a big gap. Development of Chinese banks overseas institutions, related to Chinese non-financial corporate strategy of going out and RMB internationalization strategy can Promote smoothly, Determine whether China can from the "world factory" to "financial power" and whether China can increase of influence in the world. At the same time, non financial enterprises go out also provides a rich multinational financial service demand for Chinese Banks to expand overseas, the internationalization of the RMB will help to enhance the market competitiveness of Chinese bank overseas institutions. Chinese Banks and non-financial companies support each other to expansion overseas,to Chinese economy better integration into the global economic integration process, the Chinese economic rise and development has a long-term strategic significance, inspire the motivation of this article research.Most of the previous literature focused on motivation of Banks’ overseas expansion, the impact of foreign bank entry on the host country, the foreign banks entry mode as well as institutional forms in the host country. Less in-depth, comprehensive, systematic and quantitative study Chinese bank overseas expansion characteristics, Chinese banks to expand overseas location choice factors, the reaction of the capital market for Chinese Banks to expand overseas and the actual operating performance of Chinese Banks to foreign institutions. For Chinese Banks to expand overseas study even behind the development of the practice.In this paper, based on the summary and reference to domestic and foreign scholars on the banks to expand overseas related research results, around the theme of Chinese Banks to expand overseas, focuses on the following four questions:(1) by constructing the internationalization degree index, quantitative analysis the current status of Chinese bank overseas agency, characteristics, Chinese banks internal internationalization degree ranking, as well as Chinese banks and international level leading global large banks gap.(2) Chinese Banks to expand overseas face the problem of location selection, in this paper, using a variety of econometric model empirical analysis on the influence factors of Chinese Banks to expand overseas location selection decision, solid conclusions are verified through the comparison, and to guide Chinese Banks to expand overseas location choice decisions.(3) using event study, the analysis for capital market investors have what kind of expectations and behavior on Chinese Banks to expand overseas, Whether or not optimistic about the prospect of banks to expand overseas, what impact will it have on the stock market value for overseas expansion of Chinese listed Banks.(4) using the Du Pont financial analysis method, analysis of Chinese banks to go out, overseas organizations operating performance, how much contribution to the overall profitability and anti-risk ability on Banks, whether competitive in the host country market.Through the study of the above four issues, this paper draws the following conclusion:Bank of China is currently leading Chinese banks to expand overseas, its foreign assets, revenue, net profit and number of employees accounted for were significantly higher than the other four Chinese state-owned banks, Industrial and Commercial Bank of China and Bank of Communications ranked the second echelon, China Construction Bank ranked fourth, the degree of internationalization of Agricultural Bank of China came in last.In recent years, the number of Chinese bank overseas institutions overall rise at the same time, from the point of view of geographical distribution, the number of foreign institutions outside Asia region growing faster than financial institutions in Asia, foreign institutions mainly concentrated in Asia especially in Hong Kong and Macao has eased, globalization dispersion degree increased. From the point of income structure, Chinese Banks have relied too much on credit business, the ratio of interest income in operating income accounted is too high, non-interest income is low, the diversification of business significantly lower than in degree of the leading international Banks such as citigroup, HSBC.Due to Chinese Banks to expand overseas history is not long and face greater difficulty of foreign institutional data collection and other factors, the previous literature on factors affecting the location choice of overseas expansion of Chinese banks mostly focus on theoretical analysis, empirical analysis of econometric models are rarely used. This article is differs from previous studies by other scholars, through the extensive data collection, using the empirical econometric model analysis the factors affecting the location choice of Chinese Banks to expand overseas. Empirical study results show that the Chinese Banks to expand overseas location selection decision is jointly influenced by many factors. Chinese banks overseas expansion priority choice to enter the international financial center. Chinese banks overseas location choice obviously have to follow customer motivation, the bilateral trade volume between China and the host country, China’s direct investment to the host country, has positive effect on banks’ overseas location. The high degree of economic openness of host country is also conducive to attract Chinese banks. Chinese Banks to expand overseas there is also the pursuit of profit motive, tend to enter more profit opportunities,,lower total tax rate of the country to start operations. In addition, in order to reduce the risk of overseas institutions, Chinese Banks tend to enter high government efficiency, strong legal protection of the host country, consciously avoided entering the currency tends to depreciate in countries and regions. Empirical research also found that, the geographical distance between China Beijing and the host country’s capital, the extent of cultural differences between China and the host country, the host country’s per capita gross domestic product, the host country’s GDP growth rate, depth of credit information index, for Chinese Banks to expand overseas location selection decision does not constitute a significant effect. Event study analysis Chinese Banks’ overseas M&A bank stock price relative to the market index before and after the announcement, the cumulative excess yields indicates that the capital market investors in Chinese Banks overseas M&A outlook by the target bank premium valuation levels, the merger announcement of economic cycle, whether acquiree’s main business belongs to the influence of traditional credit business, etc. Overall, in addition to the China Construction Bank acquire Bank of America (Asia), China merchants bank acquire wing lung bank, as the high premium and acquisition is in during the financial crisis and not be valued by investors, other Chinese Banks’ overseas m&a in recent years in the event period have been significantly positive cumulative excess return, showing that capital market investors optimistic expectations on Chinese funded banks to expand overseas.Through the contrastive analysis of Chinese Banks to mother line and main branches overseas financial indicators, as well as overseas branches of Chinese Banks and the host country local financial indicators evaluation trend of mainstream Banks found:in2005-2012, Chinese Banks overseas institutions profitability is relatively stable, even in a few years, the return on equity of some overseas branches is higher than the same period of return on net assets of the domestic head office. Debt paying ability and risk response ability indicators of overseas branches are in a controllable range. From the development point of view, in recent years, Chinese bank equity growth rate and total assets growth rate has remained at a high level, even during the financial crisis, it is only a slight decline. From the view of income structure, the ratio of operating income net interest income is downward trend, fee and commission income ratio increased steadily, Chinese funded commercial banks integrated degree is increased. But the integration of Chinese bank management level, product diversification degree compared with big international Banks such as citigroup, HSBC, there is still a big gap. The income structure of Chinese Banks’s overseas branches is similar to domestic institutions, give priority to with traditional credit business,.The degree integration of overseas business is to be improved. Based on theoretical analysis and empirical research, combined with the overseas expansion of Chinese funded banks and external environment, the paper proposed the following policy recommendations:(1) Banks should seize the valuable opportunity to reform the international financial markets, from the perspective of long-term strategy to accelerate the pace of overseas expansion, improve the overseas assets and income ratio, reduce the risk of assets, income, too focused on domestic, increase bank revenue and earnings at different stages of the economic cycle stability.(2)Overseas expansion preference into a major international financial center. Learning the world’s leading Banks advanced management experience and technology. The focus of the layout of the bilateral trade and Chinese closely, foreign direct investment more China host country and area, fully meet the real economy trade, investment real financial service demand, the bank’s overseas expansion strategy and Chinese enterprises going out strategy to combine, mutual support and common development.(3)Combined with the new establishment and M&A to improve the overseas agency network. Target selection should take into account the asset quality, the network of institutions, M&A unified complementary economic costs, ensure that the risk control of high-speed development process, maximize the synergy benefits integration.(4) Customer oriented, according to the actual situation of the host country market and its competitive advantage, increase the diversity of business types, to provide to meet the needs of the market for financial products and services. Set up branches at home and abroad of unified interconnection, safe and efficient business processing system, enhance the synergistic effect between different branches, business types. Strengthen the internationalized talents’ cultivation, attraction and reserves, improve the professional management ability of the bank.(5) China financial supervision departments should intensify Chinese banks overseas expansion policy to encourage and support, strengthen communication and coordination with the host supervision department, safeguard the legitimate rights and interests of Chinese Banks in the host country.