Sie sind auf Seite 1von 8

Max Ossipov

Rupashree Stanislaus
Tielin Feng
Fahad Ali H
Alrowaitea

FOR

International Business
Strategy Management
INTB841
Term 3, 2016

Contents
Executive Summary............................................................................................... 2
Introduction and Overview of the Case Study........................................................3
Analysis................................................................................................................. 3
Chinese banking System....................................................................................... 3
FDI in China........................................................................................................... 4
The HR Challenge.................................................................................................. 5
Conclusion and recommendation..........................................................................6

Executive Summary

Introduction and Overview of the Case


Study
Growth of Chinese markets offers great opportunities at all levels.
Accordingly many international players are interested in entering the
chines markets. Chinese banking sector is characterized by its
conservatism and uniqueness. Regardless of this, the government
succeeds in attracting foreign investments. The system rigidity brings
about tough challenges to international banks to operate in the Chinese
3

market. They are mainly related to a vast culture gap, labour laws and
foreign ownership restrictions. This report presents a brief of the HR
challenges and foreign investment in the Chinese banking sector and how
a crossvergence can be a possible solution to tackle these challenges.

Analysis
Chinese Banking System
The Chinese banking system is governed by two bodies: the entral bank
People's Bank of China responsible for the monetary policy and the overall
liquidity of the system and China Banking and Regulatory Commission
responsible for overall supervisory and regulatory functions. Total assets
of the banking system are around $5 trillion as of 2006.
The system is dominated by the four state-owned commercial banks
(SOCB). They account for $2,710 billion of assets, have more than 120
thousand branches nationwide with more than 1.4 million of employees.
Apart from the Big Four there are 13 joint-stock commercial banks which
market share is growing steadily (21% as of 2006) due to their better
market orientation. At the local level there are 115 city commercial banks
and thousands of credit cooperatives. Foreign bank branches account for
only 2% of the market and play a very limited role.
Revision of the Chinese banking law and liberalisation of the regulation
that followed started after the country joined the WTO in 2001. Due to
substantial directive lending, most of the banks were burdened with high
levels of non-performing loans. The measures included closure of
problematic banks, exemption of the big four to provide loans to the state
approved projects, their recapitalisation and permission to carry out
commercial banking activities.
The main differences of the Chinese banking system are within the reform
process. Firstly, the Chinese government followed domestically elaborated
norms and practices rather than trends set up by the global banking
giants. China was primarily focused on risk management, IT and global
treasury whereas global trends were in the direction of retail markets
(lending policies, bank cards and products). Secondly, China limited
foreign participation by introducing a requirement of maximum 20% in
strategic partnership and 25% for foreign ownership in any bank.
A nationwide presence of the big four with its 120,000 branches was the
main attraction for foreign investors. A single investment as such allowed
them to significantly increase their share in mainland China. To overcome
the ownership restrictions global players formed consortiums to increase
4

their businesses in the areas of credit cards, consumer finance and


treasure management.

FDI in China
The factors attract foreign investors to China

The trend
The banking industry had undergone a process of restructuring and
reorientation. M&A, globalization and internationalization of products and
service and changes in organizational structures became a global trend.
The huge market potential
Predictions shows China has huge market potential in the worlds
largest emerging economy. China will become an increasingly important
global banking market. A recent PwC UK report entitled Banking in 2050,
(www.pwc.co.uk/ nancialservices) predicted that China could overtake the
US as the worlds largest banking market by 2023 based on a projected
growth of domestic banking credit assets. The market will open up for
WHAT
as China takes steps towards greater convertibility of the
Renminbi. The foreign banking investors need to continue to expand and
build a robust presence in China.
The RMB revalue opportunity and IPO/cash out initiative
The investor will benefit from RMB revalue. In 2005, China took certain
steps to allow its currency to strengthen under a managed float
mechanism. China initiated a trading band that allowed the currency to
fluctuate by 0.3 percent in either direction (widened to 0.5 percent on May
21, 2007). The Chinese yuan appreciated 28.5% from 2005 to 2012. Do
we need so much and so precise statistic? What if use
comparisons?

The foreign investor will benefit from the IPO initiatives from the banks
they invested.

The Pros and cons for a foreign player


The pros
Access China market
Return on investment WHAT IS FIGURE?, in terms of RMB revalue, and
IPO cash out
The cons
Politics and policy risk. Total foreign ownership in any bank was capped
at 25%.

The HRM Challenges


The challenge with regard to Human Resource Management in China is to
restructure management approaches and to introduce operational
changes in order to satisfy the interests of the stakeholders Government
and foreign investors. The interests mainly include a transfer of
knowledge, a technical expertise and development of human skills in
exchange of profitability and a share in the market.
6

Originally, international banks were expected to adapt a local


management style in China and develop it to eventually merge with best
international practises. However, the conservatism of the Chinese banks
hampered this migration in order to maintain their local unique
management tactic and Confucian based culture. The US, for example,
perceive compensation, reward systems, participative management and
performance appraisal quite different. Need to explain further. Thus,
those issues constitute a significant challenge to international companies
entering the Chinese markets and bringing investments.

Crossvergence has a critical role to manage the complex relationship


between the main offices and other subsidiaries in order to overcome
cultural differences in management styles. In case of HRM challenge in
banking sector in China, the crossvergence theory is recommended to
balance the differences between the Chinese and international banks
objectives.

According to crossvergence theory Crossvergence affects knowledge


transfer in acquisitions. The cultural integration between Organizational
cultural convergence and crossvergence is towards knowledge transfer in
international strategic partnerships.

It is something different from the old value system when compared to the
new system. But as per China their organizational cultural crossvergence
is towards the relationship building following the traditional value system.
Strategic partnerships in China were focused more towards knowledge
transfer and profitability than towards their market share.

Conclusion and recommendation