Research On Cooperation And Competition Between Chinese-funded Commercial Banks And Foreign-funded Commercial Banks

As the development of the globalization of the world economy and the financial globalization continues, the internationalization trend of the banking is irreversible. Foreign commercial banks enter China one by one related to the opening of the Chinese banking, and many scholars begin to research the phenomenon of the cooperation and competition between Chinese-funded commercial banks and foreign commercial banks. In order to discuss this matter which is meaningful in theory and practice, at first we need to know the basic situation of the relationship of the cooperation and competition between Chinese-funded commercial banks and foreign commercial banks at the background of financial globalization, with analyzing China's actual situation .Chinese-funded commercial banks and Foreign-funded commercial banks both have their own advantages and disadvantages in Chinese market. Chinese-funded commercial banks have lots of branches ,and are very familiar with the Chinese market, Chinese residents have always been accepting the services of the Chinese-funded banks in the past several decades, on the other hand, the operating system of the Chinese-funded commercial banks is not so advanced compared to foreign banks, and their corporate governance structure is being reformed and improved. Foreign-funded commercial banks have the advantage of advanced system, being rich of experiences in managing globally and having many important multinational company customers. At the moment, cooperation between Chinese-funded commercial banks and foreign-funded banks is shifting from business cooperation to equity cooperation , competition is fixed on the part of the customer resources and business. Foreign commercial banks are allowed to start personal Renminbi business after the commitments fulfilling of the Chinese government as to become a member of WTO on December 11, 2006.In 2007,a group of branches of foreign commercial banks in China are approved to become corporate bodies, as a result ,the competition would be more direct and fierce.According to the point of view of the Game theory, Attitude of cooperating should be taken as to survive and develop in the long turn for market players. At the same time, cooperation on Sino-foreign commercial banks has a profound practical significance. Each of them can get benefits from cooperation which is a win-win strategy. Chinese-funded commercial banks and foreign commercial banks could cooperate in three areas ,the first one is cooperation on technology ,as Chinese-funded commercial banks can learn from foreign banks in technology to provide new products especially the inter-business ones and foreign banks enter Chinese banks with low costs. The second one is cooperation on funds, such as inter-banking borrowing, foreign commercial banks can borrow RMB from Chinese commercial banks ,and Chinese banks get foreign currencies from foreign banks, so this also makes it a win-win strategy, and both of them can cooperate on capital liquidation and so on . The third one is cooperation on capital , Chinese-funded commercial banks introduce international strategic investors, that is shares getting from the Chinese-funded commercial banks to foreign commercial banks. There are some good points in equity cooperation, for example, Chinese banks introduce capital and expand their scales, and the corporate governance structure would be improved, at last, Chinese banks are getting better; It is easier for Chinese banks to learn the advanced technology from foreign banks , then put the technology into practice. It is also easier for foreign banks and Chinese banks to cooperate in human resourcing .Chinese banks send staff to foreign banks to be trained and being taught about the useful skills which would make the quality of the staff improved. Foreign banks would take advantage of the widely branches arranging to sell their products and services and to accumulate customer resources. We can learn something useful and meaningful from the case of the equity cooperation between Bank of Communications and HSBC for Sino-foreign commercial bank cooperation.Chinese commercial banks should do more to build themselves to improve their competitiveness comprehensively in order to face the threats brought in by foreign commercial banks. On the base of the Michael Porter's theory of competition, corporate could improve their competitiveness through cutting cost , differentiation and specificity. Only do Chinese commercial banks improve corporate governance structure ,introducing modern banking management system can make them cut the costs , improve the operational effectiveness of the Bank, and make them more competitive .The key point to win the competition for Chinese banks is to enhance innovation capability because one of the the focus of the competition between Chinese banks and foreign banks would be the inter-business in the future, and this is also the way to make Chinese banks different from others. Another way is cultivating enough excellent workers who are good both in local market and global managing to make Chinese banks more competitive. Chinese commercial banks should give more attention on managing the strength of localization while taking globalization.The cooperation and competition between Chinese commercial banks and foreign ones are related to the healthy development of China's financial industry. China's financial supervising department concluding People's bank of China, Ministry of Finance P.R. China , China Banking Regulatory Commission should do something for the supervision of the Sino-foreign commercial bank cooperation and competition, such as making supervising policies related, encouraging Chinese banks and foreign banks to cooperate under the direction of the policies, guiding them compete moderately ,and being well geared to the international supervision standards. As a result, there is an environment where Chinese commercial banks and foreign banks can compete orderly, as making Chinese financial industry globalize quickly and develop in an all-around way.