An Empirical Study on Factors Affecting Foreign Bank Investment in China's Financial Market

Foreign banks have expanded rapidly in the emerging financial market since the 1990s. As the largest emerging market in the world, China is the objective of research in this paper. This paper seeks to determine the factors causing the growth of foreign banks investment in China. The amount and type of foreign bank activity varies greatly by province, with Shanghai and Beijing being by far the most important. Previous researches have shown some important factors and implications in the case of developed countries as host countries. One of the aims of the paper is to find the difference between developing countries and emerging markets. The most comprehensive examination of the development of foreign banks in China is presented and tested in order to facilitate the understanding of the expansion of international banking. The results show that market opportunity is an important determinant. International trade is also significant except for the foreign direct investment factor. The results are a little different from in the developed countries, but consistent with that of an emerging economy.