Correspondence: Susan Carpenter, The University of Edinburgh Business School, 50 George Square, Edinburgh EH8 9JY, UK. E-mail: Susan.Carpenter@ed.ac.uk

¹is a lecturer in International Business and the Director of the MSc in International Business and Emerging Markets in the University of Edinburgh Business School. She has worked for Japanese business and government organisations in Japan and the USA. Her research interests include government–business relationships in Japan and emerging markets in Asia, and the effects on foreign business ventures and country risk assessment models that provide a firmer analysis of the stability of emerging economies. She published Special Corporations and the Bureaucracy: Why Japan Can't Reform (Palgrave Macmillan, 2003) and Why Japan Can't Reform: Inside the System (Palgrave Macmillan, 2008).

²is a graduate from Edinburgh University. He has won the W.V. Stevens and Isdale Hird Memorial prizes for the best overall performance and best dissertation, respectively. He received an MSc degree in Information Systems and Management at the University of Warwick in 2008, graduating with distinction. In the summer of 2008, he interned in for the Boston offices of PRTM, a US-based management consultancy. He is currently working for a Swiss-based biotech company, where he helps managing the IPO process.

Received 24 September 2008; Revised 24 September 2008.

Abstract

China pledged on joining the World Trade Organisation to fully liberalise the banking sector by December 2006 and thus exposed its domestic banks to foreign competition. Global banks have since been lured by the opportunities that this sector presents in terms of its market size, buoyant saving rates, rising real per capita income, improved living standards, and an increased need for financial products and services. Nevertheless, foreign banks face a number of risks when entering markets in China where government tightly regulates industrial development. The Planned Economy Risk Model (PERM) is introduced to assess the dimensions of risk in entering such markets. To illustrate its use PERM is then applied for investments in China.