A Study On The Management Strategies Of Foreign Banks In Chinese Financial Market

As five years of the interim period have elapsed since China joined the WTO in December2006, opening the Chinese banking market has entered a new phase. Accordingly, foreign-owned banks in China have faced the new financial environment. The competitions in the Chinese banking industry have become more fierce and the competitions not only between foreign-owned banks and Chinese banks but also among foreign banks are expected to be intensified. Thus, Korean banks need to establish strategies in order to survive under such competitive era.In July2007, there existed in China a total of24Korean banks, which consisted of20branches,3representative offices, and1local subsidiary. In view of the long-term growth potential of the Chinese financial market resulting from the continuing economic growth of China, Korean banks’entry into China seems to have been rather behind the time.Thus, the importance of early entry into the China market needs to be emphasized seriously. Most of the Korean banks have entered China in the similar business forms and by concentrating on particular regions. As they are less recognized than Chinese banks and other foreign-owned banks, they have been faced with limitations in both business territories and customers.The main purpose of the current study is to find Korean banks’ expansion strategies to advance into China as the Chinese bank industry opened entirely because a grace period expired recently after China joined WTO. This study analyzed characteristics of Chinese bank industry by examining its developmental process, and reform and opening and also analyzed present conditions of foreign and domestic banks’ advance into China according to the recent complete opening of the bank industry.Based on present conditions and characteristics of the Chinese bank industry and foreign banks’advance into China, this study tried to find Korean banks’ expansion strategies to advance to China. The strategies suggested are as follows:(1) obeying duties imposed to local corporations such as loan-deposit ratio, limit of same persons, etc,(2) introducing and selling various and competitive financial products,(3) enhancing understanding of the Chinese financial authority and the bank market, and reinforcing loan examination,(4) securing local experts stably,(5) diversifying fundraising channels and securing stable fundraising,(6) advancing to the western area and reviewing how to take over equities of urban commercial banks,(7) expanding loan-deposit business and other financial services for Korean large companies, etc.However, in order to move forward with these expansion measures successfully, it is very important for Korean banks that have already advanced to China or are planning to advance to make a long and mid-term plan for accurate targeting and niche marketing based on their own advantages. In addition, thorough preparations and seamless practice for localization are required to avoid excessive competitions among Korean banks, also information exchanges and communications among Korean banks in China should be reinforced even more. Moreover, it is necessary to enhance understanding about policy trends of the Chinese supervisory authority and China’s common financial practice. Also it is needed to keep up with the trend of the times without haste in a view of society, culture and systems of China.