Entry of foreign banks in the People's Republic of China: a survival analysis

Abstract

This study uses survival analysis to examine the factors determining the decision of a foreign bank to establish a branch in the PRC. Bank size and international diversification are found to have a significant positive impact on the probability of entry. Banks from Asia have particular cultural and locational advantages in this context and are found to be more likely to enter this market. Market conditions in the host economy, exemplified by an improved political environment and increasing levels of international trade, are also found to be significant determinants of the timing of entry. Access to China's banking sector will increase upon entry to the WTO and again cultural links and location are likely to play a key role for foreign entrants, particularly for those operating in local currency markets.

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