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Citigroup Entering China

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SEPTEMBER 11, 2006

Citigroup Entering China Argument


There are different indicators of adaptability, a company is deemed adaptable if it is able and continues to be innovative in a challenging and foreign environment. Citigroup represents an excellent example of an entity that has displayed adaptability to its environment. In 2001, Citigroup decided to increase its offering in China despite the change in the Chinese Environment, China was entering in World Trade Organization (WTO). Such a venture implied uncertainty in the country's economy and laws. As a learning team, we have analyzed the case "Citigroup in Post-WTO China". Sides were taken on whether Citigroup has shown adaptability in its attempt to expand its operations in China. The team found the case very challenging to analyze and was at 'odds' about how to proceed. However, it was an overwhelming consensus that Citigroup, in fact, displayed tremendous level of adaptability. To this end, the arguments and the evidence for adaptability far outweighed those of whether Citigroup did not displayed adaptability in its attempt to expand operations in China. The salient arguments for each side of the debate are outlined below with an agreement as to whether or not Citigroup displayed adaptability.

Arguments supporting Citigroup's Adaptability

China is one of many Asian countries that have a higher competitive economic growth potential. In 2001, when China entered into the World Trade Organization, there was tremendous hope that the Chinese market would open up for foreign financial institutions. Citigroup's entrance into post-WTO China; has raised questions about the company's ability to use adaptability while trying to grow its operations in China. The merger between Travelers and Citicorp was finalized in 1998, a new company emerged Citigroup Inc. Travelers Group Inc. was a well-established financial services company that provided regular banking and investing services such as investment banking, asset management and consumer lending. Travelers Group Inc. also offered an extensive line of insurance services such as life insurance and property casualty insurance. By adding the financial services from Travelers Group Inc. to the existing commercial and consumer lending services of Citigroup, one of the world's largest financial institutions was created ( With potential access into China's market Citigroup needed to determine which of their financial services had the best chance for success and acceptance in this new marketplace. Citigroup needed to move slowly into this market because any aggression could lead the Chinese government to impose restrictions on any foreign expansion into the country. Other challenges facing any foreign country that wanted entry into China included: human resources, regional differences and limitations on e-commerce due to limited access to the Internet because of government regulations (

Citigroup had at least one advantage over some of the competition. Citibank, the banking division within Citigroup, had an established record of successful entry into less developed countries. The question remaining for Citigroup to answer was other than banking services what other financial and insurance products could be successfully launched and accepted into the Chinese market. Citigroup has a long history in China, first establishing an office in Shanghai on May 15, 1902. An argument for success is that Citigroup has been able to demonstrate its adaptability in its attempts to expand its operations in China through its ability to access capital, cash flow, and have qualified staff. Mazzucca reported that the organization in its continued quest to hire qualified staff has recently hired an experienced Chairman and CEO for its foreign consumer business and continues to receive good report on its ventures in China" (2006, p. 20). Mazzuca further reported in his article that several that "regulators in China had approved Citi as a qualified domestic institutional investor, which allows its customers the option to invest in foreign bonds" (2006, p. 20). Mazzucca quoted, Richard Stanley, Citigroup's CEO in his article "we look forward to introducing new products over the coming months that allow our customers in China access to significant overseas investment opportunities." (2006, p. 20).

Citigroup already has a large international presence in 2001; Citigroup was operating in over 100 countries and had over 268,000 employees. Citigroup continues to display adaptability in its attempt to expand operations in China through hiring and training the local population, over 95% of all Citibank jobs outside of the US were held by locals ( Currently Citigroup is leading foreign bank operating in China. The company has successfully launched many financial and insurance services and products countrywide. In 2003, Citigroup acquired shares in Shanghai Pudong Development Bank (SPDB). This new alliance with SPDB has allowed the company to launch a dual currency credit card, the first of its kind in China. (Hu Shuli, 2003) The savings rate in China is 30%, compared to 2% in the U.S. Most of this money is kept in standard savings accounts earning minimal interest. Citibank plans to offer a wide variety of savings accounts that will pay better interest rates, when the Chinese banking sector opens fully to foreign competition



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