Citibank in China

1. What were the reasons for China to open banking to
foreign banks? The Peoples Republic of China wanted to gain membership into the World Trade Organization (WTO) and the People's Bank of China (PBOC) wanted to force domestic banks to become more competitive.

2. What are Citibank's competitive advantages in
foreign markets? Citibank's competitive advantage in a foreign market is its global network. They've been in foreign markets for nearly 100 years. Citibank has experience in these volatile markets and thus has a level of operational expertise unmatched by any other competitor. They have a reputation to commit to stay in a location despite temporary disappointing profits. When in emerging markets, Citibank hires and trains locally. This earned the respect of the community and governments. Citibank leads in technological superiority, exceptional human resource practices, and often-imitated accounting practices.

3. What is Citibank's worldwide strategy?
Citibank's worldwide strategy is to focus on what they do best. They will not participate in operations that don't bring in profits. This is why they are not involved in insurance, lending on a large scale, equities, or global investment banking. They would also market Citibanking(r) as the country's new premium banking product.

4. Describe Citibank's Global Relationship Banking
strategy.

Global Relationship Banking (GRB) is Citibank’s strategy for targeting strong state-owned enterprises. According to Chris Tibbs, it is to identify 10 industries, which would develop the fastest in a country, and target profitable companies within those industries.

5. Describe Citibank's Global Consumer Finance strategy.

Citibank's Global Consumer Finance strategy is described as uniform service for all their clients no matter where they choose to bank. This will make the experience convenient and reliable. Citibank charges a premium for these services but they are gladly paid by internationally-minded and newly wealthy business elite who want first rate service.

6. What is Citibank's preferred legal structure when
operating in foreign countries, and what was the
opinion of the Bank's executives in China concerning
Citibank's possible acquisition of a local financial
institution? Citibank will not participate in a joint venture unless forced to by the central banks. Citibank executives, mainly Tibbs thinks the possible acquisition of a local financial institution would be unlikely and not at all desirable. He believed that fixing these wreaked portfolios would be a waste of resources.

7. Describe the evolution of Citibank's presence in China
after 1940. After WWII Citibank's branches were all closed down or taken over by the communist government. In 1984 Citibank opened its first office in Shenzhen and its first rep offices in Beijing and Shanghai. The PBOC upgraded the Shanghai rep office to full branch status in 1991. In 1993 Citibank moved its headquarters from Hong Kong to Shanghai. The Beijing rep office was also upgraded in 1995 to full branch status. In December 1996 the People's Bank of China granted Citibank the right to conduct business in RMB. In February 1997 Citibank moved to the new financial district in Shanghai's Pudong. In August of 1997 Citibank had the largest network among American banks in China, with branches in Beijing, Shanghai, and Shenzhen.

8. What was Citibank allowed to do in China in 1997? Citibank was permitted to engage in:

hard-currency transactions exchange foreign currencies buy and sell stock and securities

9. In December 23, 1996 the People's Republic of China
Central Bank (PBOC) granted Citibank permission to
do local business, but subject to certain
restrictions. What were those restrictions?

These restrictions included:
1. Branches dealing in RMB must all be in Pudong.
2. RMB could only be accepted from foreigners and FIEs but not from local companies or Chinese individuals.
3. They could make RMB loans and extend guarantees to FIEs and foreigners with offices in Shanghai, but not to most local companies or individuals.
4. Total RMB deposits could not exceed 35% of total foreign currency liabilities, excluding interbank deposits.
5. They could lend at rates fixed by the PBOC and banks could also borrow RMB on the local interbank market and could "when necessary" borrow from the PBOC.

10. What is the government of China's concern with
credit cards? Their concern with credit cards is that it will drive inflation up and decrease savings.

11. Situate yourself in 1997 to answer this question: Is
any possibility that the Chinese government will
allow Citibank to issue credit cards in China? In 1997, I think the government would allow Citibank to issue credit cards in China because they are in the midst of a lot of positive change. I think if there was a demand for it, the government would allow it.

12. How could Citibank's executives ensure that Citibank
will maintain its "first mover" advantage? Citibank executives could ensure that Citibank will maintain its "first mover" advantage by constantly looking out for emerging markets.

13. How could Citibank's executives ensure that Citibank
would be among the first foreign banks to enter the
domestic market? I think that Citibank will be among the first foreign banks to enter into any domestic market because they have a long history of doing it all over the world. Their experience is unsurpassed.

14. If the PBOC were to decide to open China's retail
market to other foreign banks before granting
licenses to Citibank, how could Citibank establish its
dominant position in this market? While they don't possess a license to do business in the retail market they will obviously not establish a dominant position in the retail market until they do.