A Study Of The Investment Of Hong Kong Owned Banks And The Impact On Mainland Banks Under The Framework Of CEPA

Since China adopted the reform and opening-up policy, our country gradually relaxedcontrols on foreign banks. China mainland and Hong Kong signed the Closer EconomicPartnership Arrangement (CEPA) in2003. In support of the policy, Hong Kong owned banksspeed up the pace to invest in the Mainland.Hong Kong owned banks has become the mostimportant part of foreign banks in Mainland. Their involvement in the Mainland’s bankingmarket keeps rising, and has made a certain impact on the Mainland banks.This thesis firstly reviews theories about bank internationalization,and makes acomprehensive summary on the study status of impact of foreign banks’ investment.Secondly,under the framework of CEPA,this article makes detailed analysis of the basicconditions of Hong Kong owned banks’ investment in the Mainland from objective basis andpractical angle,and analyses the historic opportunity of Hong Kong owned banks’ investment inMainland under the framework of CEPA.Then this paper summarizes the status of Hong Kongowned banks’ investment in the Mainland,and characteristics of Hong Kong owned banks’location choice. After that, this paper chooses financial indicators as dependent variable torepresent the profitability, liquidity, safety and operational efficiency of the domestic banks forthe research, takes Hong Kong owned banks’investment variable as independent variable, thenselect the characteristics of domestic banks and macroeconomic factors as control variables.Withthe variables chosen, this paper verifies the results of the model with panel data. Finally, thispaper summarises conclusions and gives corresponding policy recommendations according tothe empirical results.Conclusions show that, Hong Kong owned banks distribute investments mainly in PearlRiver Delta, Yangtze River Delta and the Bohai Rim Economic Circle.Guangdong province,especially Pearl River Delta,is the region with the highest degree of agglomeration of Hongkongowned banks’ branches. Big cities of the Mainland such as Beijing,Shanghai,Guangzhou,Shenzhen,etc.,are cities where Hong Kong owned banks’ branches cluster.Hongkong ownedbanks concentrated their branches in places where Hongkong enterprises mainly distributed.Theinvestment of Hong Kong banks will help upgrade the Mainland commercial banks’profitability,asset security and operational capability, but has significant negative effect on themainland bank’ liquidity.