In order to improve the banking sustainability in China, China’s government has announced that the restrictions on foreign shareholding ratio in domestic banks will be canceled. However, the effectiveness of foreign strategic investment needs checking. In addition, under the new policy, the method by which banks formulate appropriate internal decisions about introducing foreign strategic investment is an important issue for bank managers. Continuous productivity growth will bring sustainable development; therefore, the aims of this paper are: (1) to find the relationship between foreign strategic investment and productivity change of China’s banks, and to verify the effectiveness of introducing foreign strategic investment; (2) to find the optimal foreign shareholding ratio; (3) to show how foreign strategic investment affects the productivity of China’s banks, i.e. the transmission mechanism between them, and to provide bank managers with evidence and support for making decisions on introduction of foreign strategic investment. This paper employs the Malmquist-Luenberger index and combines it with Epsilon-based-measure to derive a new index, i.e. the EBM-Malmquist-Luenberger index, to measure the dynamic productivity change of China’s banks. In addition, the dynamic panel data and system GMM estimator are used to analyze the transmission mechanism as well as the impact of foreign strategic investment on the productivity of China’s banks. The results revealed three facts. First, when the foreign shareholding ratio increases within a given range, foreign strategic investment continuously improves the productivity and sustainability of China’s banks. Second, an inverse N-shaped relation between foreign strategic investment and productivity growth of China’s banks is supported, and the optimal foreign shareholding ratio is 20.16%. Last but not least, foreign strategic investment improves the productivity and sustainability of China’s banks, mainly through changing scale efficiency. The results of this paper may provide support for policy formulation of China’s banks.

How does the economy of China and Japan interact with each other? Through building vector autoregression (VAR) model, this study examines the transmission mechanism of economic synchronization among the two nations from three perspectives, namely foreign direct investment (FDI), bilateral trade, and political relation. Based on this, relevant stabilizing measures for China’s economy are proposed. The findings of this study are as follows: (a) There exists business cycle co-movement between China and Japan. (b) The transmission mechanism of this co-movement contains bilateral trade and FDI. Therein, import contributes the most to China’s economic fluctuation, which is followed by FDI and export. (c) Bilateral political relation exerts indirect influence on China-Japan economic synchronization. (d) The impact of Japan’s economic fluctuations on the economy of China would be mitigated by expanding international trade markets, reducing financial market access restrictions, strengthening the political mutual trust, and encouraging communications between China and Japan in science, technology, and education, etc.