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Entry of foreign banks in Shanghai: implications for business strategies in an increasingly competitive market

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  • M.K. Leung

    (School of Accounting and Finance, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, People's Republic of China)

  • T. Young

    (School of Economic Studies, University of Manchester, Manchester M13 9PL, England, UK)

Abstract

This paper uses a simple mean-variance choice model as the basis of a duration analysis of the factors determining the decision of a foreign bank to establish a branch in Shanghai, the fast developing financial centre in China. Bank attributes, namely region of origin, parent bank size, the number of international branches and their branch network in China, have a significant impact on the time to entry. A country's share of total foreign direct investment in Shanghai also significantly affects the entry decision. The attributes facilitating entry also provide the foreign bank with a competitive advantage in its foreign currency transactions in Shanghai. However, with the ensuing market liberalisations after China's WTO accession, the entrants' competitiveness may not be sustained in the local currency market, especially following the proactive business strategies of Chinese banks and the protectionist measures of the government. It is expected that only a small number of the entrants will be able to emerge as big market players in the growing domestic currency market in Shanghai. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • M.K. Leung & T. Young, 2005. "Entry of foreign banks in Shanghai: implications for business strategies in an increasingly competitive market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(6), pages 387-395.
    • Handle: RePEc:wly:mgtdec:v:26:y:2005:i:6:p:387-395
    DOI: 10.1002/mde.1235
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    References listed on IDEAS

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    6. Grosse, Robert & Goldberg, Lawrence G., 1991. "Foreign bank activity in the United States: An analysis by country of origin," Journal of Banking & Finance, Elsevier, vol. 15(6), pages 1093-1112, December.
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    Cited by:

    1. Hsiu-Ling Wu & Chien-Hsun Chen & Mei-Hsuan Lin, 2007. "The Effect of Foreign Bank Entry on the Operational Performance of Commercial Banks in the Chinese Transitional Economy," Post-Communist Economies, Taylor & Francis Journals, vol. 19(3), pages 343-357.
    2. Chen, Chien-Hsun, 2023. "Prospects for Taiwan’s Outward Investment in China," MPRA Paper 116578, University Library of Munich, Germany.
    3. Man K. Leung & Trevor Young & Michael K. Fung, 2008. "The entry and exit decisions of foreign banks in Hong Kong," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(6), pages 503-512.

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