Picking up the gauntlet: Bank competition in China after World Trade Organization entry
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Volume 4 Number 3
Picking up the gauntlet: Bank competition in China after World Trade Organization entry Bin Jiang,* Peter Locke and William Willette *University of Texas at Arlington, Box 19437, 535 Business Building, Arlington, TX 76019-0437, USA tel: +1 817 272 3562; fax: +1 817 272 5801; e-mail: [email protected]
Bin Jiang is a doctoral student in the Department of Information Systems and Operations Management at the University of Texas, Arlington. He holds a BS in Electrical Engineering from the Nanjing Univeristy of Posts and Telecommunications in China and an MBA from the Marshall School of Business at the University of Southern California. His research interests include supply chain management, international business, China’s role in the global supply system and operations management. Peter Locke is an associate professor of finance at George Washington University. He received his PhD in economics from Texas A&M University in 1987. He was a staff economist at the US Commodity Futures Trading Commission (CTFC), which regulates futures exchanges in the USA. While at the CFTC, he became involved in several lines of research, focusing on the behaviour of floor traders on the futures exchanges, as well as index arbitrage. Recently he has turned his attention to behavioural issues, and the risks and returns associated with speculative trading. William Willette is a doctoral student in information systems at the University of Texas at Arlington. He has over 25 years’ experience as an owner of a manufacturing company. His research interests are
information technology and its role in achieving strategic competitiveness, knowledge creation and its strategic leveraging, human–computer interfacing, and interpersonal business communication.
ABSTRACT Ericsson (Nanjing)’s transfer from Chinese banks to Citibank (China) in March 2002 shocked the Chinese banking community and forced an early awareness of the realities of international competition in China’s banking industry. Ericsson moved due to the lack of factoring by Chinese banks and the ability of foreign banks to offer more services specialised to international accounts. Chinese banks have no factoring experience, no national credit checking, and operate under government-mandated separation of banking and insurance industries. Foreign banks operate in an environment favouring service integrations and they have extensive experience offering single-source banking, insurance and investment services. Currently, Chinese banks are required to service the unprofitable rural areas of China while foreign competitors concentrate on the more lucrative urban areas. With increasing trade and mounting competitive forces resulting from the 2001 entry into the World Trade Organization (WTO), Chinese banking regulators are expected to ease regulations on Chinese banks. Although penetration of Chinese banks into the foreign competitors’ niche may be currently untenable, Chinese banks can capitalise on state-owned and local firms in anticipation of
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