The Rise of Foreign Investment in China’s Banks

The Rise of Foreign Investment in China’s Banks—Taking Stock

December 1, 2006

Preview Citation

Format: Chicago

Lamin Y Leigh, and Richard Podpiera. The Rise of Foreign Investment in China’s Banks—Taking Stock, (USA: International Monetary Fund, 2006) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The recent wave of foreign investment in China's banks and the prospects of further opening of the banking sector under the WTO agreement suggest that foreign banks are likely to play an increasingly important role in China. This paper takes stock of the involvement of foreign banks in the Chinese banking sector in the perspective of international experience. While in most other countries foreign bank entry took the form of direct takeover or majority shareholding, foreign investments in China's banks have been minority shareholdings with very limited management involvement. The paper concludes that China appears to be well positioned to benefit from further opening of the banking sector to foreign investors. International experience suggests that greater competition from and participation of foreign banks can in general bring important benefits if appropriate incentives and sufficient opportunities are created.

Subject: Banking, Commercial banks, Credit, Foreign banks, Foreign direct investment

Keywords: Bank, Bank entry, China, Commercial bank, Investor, WP

Publication Details

Pages:

14
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/292
Stock No:

WPIEA2006292
ISBN:

9781451865523
ISSN:

1018-5941

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