Domestic banks' responses to the entry of foreign banks in China

Abstract

Purpose – This paper examines the effect that foreign bank entry into China had on transaction fees and service fees charged by domestic Chinese banks. Design/methodology/approach – This paper is an empirical study using financial data for listed Chinese banks collected from the China Stock Market Financial Statement Database. Findings – This paper finds that domestic banks cut transaction fees and service fees shortly before the entry into China of foreign banks, and domestic banks did not cut transaction fees and service fees after foreign banks entered into China. Research limitations/implications – This paper does not examine any non-price strategies employed by local Chinese banks in response to the entry of foreign banks. Originality/value – This is the first study to examine transaction fees and service fees charged by domestic Chinese banks in response to the entry of foreign banks into China.