Author(s)

Chuanrui Zhu

Corresponding Author

Chuanrui Zhu

Abstract

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.

Keywords

Foreign strategic investor, Commercial banks, Liquidity crisis, Shareholding changes.