Research On Influential Factors Of Foreign Banks Entering China During Economic Transition Period

With the implement of open policy at the end of 1970s, China experienced the shift of economy system, from highly-concentrated planned economy to market economy. Since reform and open policy, especially after China joined the WTO, there is a increasing number of foreign banks come to establish organizations and businesses in China. On December 12th Of 2006, after five-year transitional period, China government opened the financial market to the foreign banks as well as cancelled all the limitations in property rights and management rights to foreign banks. Then foreign banks launched fierce competition with national banks in many areas. During the period of China economic transition, the entrance of foreign banks will surely bring serious challenges to banking industry of China as well as bring great influences on the economy and finance of China. So in this particular time, we try to study the reason why foreign banks entering market of China and the corresponding strategies will provide the basis for the future bank development strategy and financial policy of our country. This study will have a very important theoretic value and practical significance.The paper first makes a simple and systematic comb on the former theory research and development situation of foreign banks in our country. Then it mainly analyzes the factors which affect foreign banks chose entering China under the background of China economic transition. It selects three most important factors as the research object:gross domestic product (GDP), foreign direct investment (FDI) and foreign trade. In order to verify what changes have taken place in the effect factors of foreign banks entering China, it uses multiple linear regression method to establish a mathematical model. Finally this paper gives its suggestions about how to better cope with the entry of foreign banks in China and develop China's banking industry.This paper is divided into six parts. The first part is the introduction, which explains the research background and significance, main purpose, research methodology, literature review and the originality of the study. The second part will introduce certain research results of international study on the entrance motivation of foreign banks. The third part of the study mainly analyzes the reasons that foreign banks enter other countries at first. Then it introduces the form of organization which the foreign banks in China choose and the current development of foreign banks in China. The fourth part is an empirical study which aims to prove the correctional dependence of the three deciding factors by combining the mathematical model and liner regression. The fifth part put forward corresponding policy and suggestions about promoting the future development of our banking system based on the research results of the above study. The sixth part makes a general conclusion to the whole study.