Research papers

Does the Chinese banking system benefit from foreign investors?

by Alicia Garcia-Herrero and Daniel Santabarbara, Bank of Finland's Institute for Economies in Transition (BOFIT) Discussion Papers no 11/2008

Abstract

We find empirical evidence that the Chinese banking system has benefited from the entry of foreign investors through higher profitability and increased efficiency of the banking system. Foreign participation, which consists of a minority stake in a Chinese bank (in contrast to the typical pattern in emerging countries), appears to be most effective when the foreign bank acts as a strategic investor. Purely financial investors contribute little, if anything, to bank performance.