Abstract: China Banking Regulatory Commission (CBRC) has been encouraging foreign banks to enter Chinese markets by the way of establishing an institution with legal person status while restricting the entry of foreign banks through M&A.This paper starts with the basic assumptions that the local banks possess the information advantage while the foreign banks possess the financing cost advantage.Bank credit market competition model under the asymmetric information is applied to analyze the effects on loan prices of entry of foreign banks.Theoretically model the entry of foreign banks through Greenfield investments mode and mergers and acquisitions respectively, and the acquisition targets are divide into big banks and small banks by size.It is found that there is little effect on the loan prices of local credit markets when foreign banks enter through merge the bigger banks, and the entering of foreign banks though merge the smaller banks will decrease the loan prices of the banking markets comprehensively, loan prices of some market segments (old customers markets of the big loser bank) will be greatly reduced when foreign banks enter though Greenfield investments.The conclusion of this paper can provide an important guidance for CBRC's policy making for the entry of foreign banks.

Key words: foreign banks, credit markets, asymmetric information, mergers and acquisitions