Banking in China
Analyze and evaluate the strengths and weaknesses of Citibank as they apply to banking in China, and indicate whether other Citigroup activities can build on Citibank’s China experience. Citibank can rely on many advantages to penetrate the Chinese market. Its huge experience with the developing markets first provides the bank a reliable and efficient mainframe to face the difficulties of the buoyant Chinese market. Moreover, China is an historic location for Citibank activities since the group has been present there since 1902.
With the first liberalisation phase launched by Deng Xiaoping, Citibank was one of the first foreign banks to reach anew the Chinese shores. Both this specific ability to deal with high-risky markets and this first-coming policy give the bank the opportunity to develop an efficient and well-rooted network in China. Consequently, the bank can boast of having a real top-of-mind brand (professionalism, deep knowledge of the market etc. ) among the foreign companies implemented in China.
Thus the Bank developed its recognition in China not only with the foreign companies but also with government itself. Regarding the professionalism for example, the managers of the PBOC implemented the Citibank audit procedures to the institution so that China could have a top of the art process of audit for its financial institution. The collaboration with the Chinese authorities should even go further since the bank with its long term policy is becoming a key player in the Chinese banking system.
The bank can also take advantage of its highly efficient structure compared to the Chinese banks rotten with bad loans. Eventually, we should quote the substantial part that financial and technological innovations play in the strategy of the group. Though inappropriate to the old current Chinese system, we can assume that a future overhaul of the Chinese banking system may happen. If so, Citibank would have already the IT structure to meet the new Chinese market expectations. But Citibank must nevertheless face a series of hindrances to fully penetrate the market.
Despite its good relations with the PBOC, its range inside the Chinese market is still limited to the foreign firms. Nothing can secure the Citibank from a bunch of new regulatory rules aiming at curbing its growing influence in China. Penetrating deeper the market would probably mean for the Bank to do even bigger concessions to the Chinese government. However concessions can be a threat for the Bank, for example it is still refusing any joint venture to prevent local intelligence from robbing its intellectual properties.
Does the experience of Citibank can be useful for implementing any other activities of Citigroup in China? The future privatization of the SOEs will create a huge pool of opportunities for many foreign financial services. A fully developed network like the one Citibank is currently creating therefore would be useful for the all activities of the group. An opportunity would be in the insurance market. Indeed, the Chinese government tries to catch up with the international standards (process, marketing… ) to create Chinese leaders in this field.
As it had already been done with the audit standard of the PBOC, we could assume that the same principle might be used regarding the insurance sector (the locals taking the Citigroup standards). Nevertheless we must highlight the importance of regulation. If Citigroup floods the Chinese market with all kind of services it would jeopardize its position since the government may probably create rules to curb the dangerous growth of the Bank in the country. Citigroup is on the tightrope: well admitted leader in China it must prevent from being perceived as a threat.