The entry of international banks in China

Abstract

With the remarkable degree of openness of China’s economy, an increasing number of foreign banks are rushing into this country. Two main theories prevail in current studies on the motivations of foreign banks to enter a new country, namely, customer-driven or market opportunity driven. Using the event study methodology, this paper analyses the value effect on foreign banks of the “entering the Chinese market” event. The results show that compared to customer-driven factors, the new opportunities of the Chinese market better explain this value effect. Our results provide a reference for foreign banks on operating strategies in China and enable a better understanding of the choice of destination and motivations for foreign banks to enter China.