English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Global: Zendy Plus annual

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Global: Zendy Tools annual

Global: Zendy Free Plan

Global: Zendy Tools monthly

Global: Zendy Plus monthly

China’s commercial banks have been keen to introduce foreign strategic investors to help with management since 2003. Banks of different levels, from the four well-known state-owned banks, including the ‘Universal Bank’, ICBC, to urban commercial banks, have made different types of attempts. Among those cases, the mass introduction of foreign strategic investors to four state-owned banks is the stereotype. With the help of foreign strategic investor, China’s commercial banks could not only absorb piles of foreign investments and learn about advanced risk management system and operation experience, but also improve their lagging information disclosure process, enhancing the competitiveness domestically and internationally. With the outbreak of financial crisis in 2008, the need of liquidity had reached the peak. Coincidently, it was exactly the time for most foreign strategic investors passing through their shareholding restricted period, so most of them sold their shares of China’s commercial banks to cash out. The Union Bank of Switzerland (UBS) sold all shares of Bank of China (BOC) at the end of December in 2008, becoming the first foreign strategic investor to quit Chinese market. After that, other foreign strategic investors withdrew their capital gradually during the following two years. Thus, it is important to think twice about the positive influence brought by foreign strategic investors and the negative impact when they quitted market. Among all the foreign strategic investors of China’s commercial banks, the Union Bank of Switzerland was the most obvious share seller, who sold 3.38 billion shares of Bank of China, cashing out about 8000 million dollars in 2008. Bank of China is not only an influential bank in China, with large scale of assets and wide range of business, but also an outstanding bank internationally. When BOC cooperated with the Union Bank of Switzerland (UBS), The Royal Bank of Scotland Group Public Limited Company (RBS), Temasek Holdings and Asian Development Bank (ADB), the BOC has greatly improved a large number of areas, including private finance, corporate finance, human resources, inner supervision and so on. Therefore, the author chose the Bank of China and its foreign strategic investors as the main object to discuss about the influence of the reduction of shareholdings on BOC, under the impact of international financial crisis in 2008. The history of the introduction of foreign strategic investors to China’s commercial banks is not so long. However, the influence of that has come to light in the past about ten years. Though many commercial banks have introduced foreign strategic investors to help with their management, fewer people have focused on the influence of their withdrawal on China’s commercial banks after the restricted period [1]. Most academics mainly paid attention to principles commercial banks should obey and points they should consider at the point of introducing foreign strategic investors. For example, Wang, Yang, and Xu (2017) developed an empirical model to prove that the introduction of foreign strategic investors has increased the capital adequacy ratio and off-balance sheet business ratio. In the meanwhile, it has reduced NPL ratio and asset-liability ratio. Some academics have also conducted research on the influence of commercial banks when their foreign strategic investors sold shares in a short time. Yuan (2016) took Industrial Bank as sample, finding that the exit of foreign strategic investors had negative 2018 International Conference on Economics, Politics and Business Management (ICEPBM 2018) Copyright © (2018) Francis Academic Press, UK 138 influence on management structure of Industrial Bank. Tian (2016) and Cai (2015) all focused on China Construction Bank(CCB) and its foreign strategic investor, Bank of America. Both of them have discovered that the reduction of shareholding of Bank of America negatively influenced corporate governance while had no obvious influence on operation performance. 1. Background Information 1.1 The Introduction of Foreign Strategic Investors Since it was illegal for foreign financial institutions to hold shares of China’s commercial banks, both ADB holding China Everbright Bank and IFC holding Bank of Shanghai were exceptions approved by China’s State Department. Even though they didn’t have any business or technique cooperation and the ratio of shares that foreign investors held was at a very low level [2]. Time came to 2005, with the introduction of RBS, UBS and ADB to the BOC and the introduction of the Bank of America to CCB, five supervision institutions, including China’s Ministry of Commerce, Security Regulatory Commission and State Administration of Foreign Exchange published Regulatory Principles for Foreign Strategic Investors to Invest China’s Listed Companies jointly. Since then, the introduction of foreign strategic investors to China’s commercial banks became one of the important ways for the development of commercial banks. The proportion of the foreign investors of China’s commercial banks reached a peak in 2007, contributing to over 2.4% assets of commercial banks in China. It was followed by more revision of Regulatory Principles for Foreign Strategic Investors to Invest China’s Listed Companies, since it was the guideline of all foreign investment and should be adaptable to different stages of China’s commercial banks development. 1.2 International Liquidity Shocks When the financial crisis broke out in 2008, western developed countries, represented by USA, were the first ones to come into economic predicament. In the middle of July of 2008, two famous tycoons of mortgage loans in America, Freddie Mac and Fannie Mae, suffered a big loss of over 70 billion dollars and were taken over by US government in the end. However, the US government couldn’t always be the saver [3]. With the rejection of saving Lehman Brothers Holdings, it finally broke down and aroused huge waves in financial market, domestically and internationally. Market confidence suddenly collapsed and the stock prices experienced dramatic drop. Under this circumstance, the liquidity was severely needed on the market. Though the US government carried out rounds of financial aids to try to help the poor stock prices, it didn’t make too much sense. Represented by short-term interest rate, traditional monetary policies were out of order. The Wall Street tycoons in the past could no longer maintain their confidence and optimism; they all took various measures actively to try to save themselves. These measures include collecting huge amount of capital, eliminating problematic assets and selling most of the shares they held. Then the need of capital and liquidity became the most emergent issue for all financial institutions 1.3 Crazy Oversell of China’s Foreign Strategic Investors China had become more open to foreign capital since it joined WTO. With the establishment of China Banking Regulatory Commission in 2003, more foreign strategic investors have been introduced to commercial banks gradually. China’s four representative state-owned banks (except Agricultural Bank of China) mainly introduced foreign strategic investors between 2004 and 2006. According to Regulatory Principles for Foreign Strategic Investors to Invest China’s Listed Companies, foreign strategic investors must hold shares of China’s listed companies for at least 3 years. That is to say, 2007~2009 was exactly the period that most foreign strategic investors could sell their shares in hand [4]. For foreign strategic investors of BOC, UBS sold all shares at the end of 2008, cashing out about 8000 million dollars; RBS sold 10.8 billion shares of BOC at a time a month after the restricted period;

The Impact of Foreign Strategic Investors’ Shareholding Changes on China's Commercial Banks under the Impact of International Liquidity Crisis—Targeting at Bank of China and its Foreign Strategic Investors in Financial Crisis