Citigroup - Pros

Taking Sides: Citigroup in Post WTO China

Many people are not aware that Citigroup has been around since the early 1800's. Citibank, a subsidiary of Citigroup, is one of the charter members of the American financial industry that consumers know today. As early as the 1820's Citibank established the first monthly trans-Atlantic trade route, the Blackball line. Citibank has always been heavily involved in the progress and expansion of trade and commerce on a global level. Today, Citigroup has been around for almost 200 years, conducts business in over 100 countries, has more than 300,000 employees that service over 200 million customer accounts (Citigroup, 2005). The purpose of this paper will be to discuss whether or not Citigroup has displayed adaptability when entering post WTO China.

Citigroup adaptability

Three members of the team have chosen to show support that Citigroup has not displayed adaptability with their businesses in China. The remaining two team members have chosen to support Citigroup and its efforts to be adaptable to the business and financial industry of post WTO China. Figure 1 lists several of the reasons mentioned in the case supporting the different team sides and respective discussions.

Figure 1: Citigroup's Adaptability/Non-Adaptability

Support Adaptability Does not Support Adaptability

1. Powerful bank in China

2. Long tenure in China

3. Opened 14 branches in 9 cities in the 1930s

4. Opened new branches in China with permission of Chinese govt. in the 1980s

5. Large global network

6. Close ties with local community

7. Advanced technology and accounting practices

8. People's Republic of China chose to work with Citigroup to improve internal auditing of the banking systems

9. Partnership with other banks to expand service offerings

10. High priority on Human Resources 1. Limitations of foreign banks in China

2. Restriction from providing credit cards

3. Risk of misuse of credit cards and spending limits

4. Citibank forced Chinese banks to conform to new standards

5. Citigroup employees are not accustomed to culture of China

This figure in not intended to be an all-inclusive list, and does not cover all the reasons supporting either side of the discussions; it is merely a listing of the topics that were discussed amongst the team.

Citigroup has not displayed adaptability

China is a very unusual market and any U.S. company that tries to move in to this territory will have a hard time succeeding. The restrictions placed on foreign companies to protect local banks were very demanding. Due to the high amounts of local debt and corruption many banks were afraid of having the banking in China opened up to large foreign companies. Chinese people were accustomed to what they had and fear was all they had left.

The Chinese government had also restricted Citigroup from providing credit cards. There was a fear that offering credit cards to China's residents would cause unmanageable inflation. If Citigroup does decided to offer credit cards one day, there is a great possibility that they will lose an abundant amount of money. Local people are not used to using credit, and therefore, may take advantage of the product and the bank that offers it. In return, this new spending freedom could significantly increase the debt of the Chinese population.

However, putting all other restrictions aside, the culture in China is very different than the culture in the US. Before Citigroup's entrance into China, competitiveness and confrontation were not strong characteristics. Therefore, Citigroup did not adapt to the environment in China, the banks and the people in China adapted to Citigroup. If Citigroup were to adapt to China's banking culture, it would not have been as successful as it is now. Liping He and Xiaohang Fan (2004) wrote:

An earlier expectation was that large international retail banks, such as the US-based Citibank, the UK-based HSBC, and Germany-based Deutsche Bank, would move quickly by increasing their branch network in China to reap the opportunity of China's WTO membership. This has not appeared to be the case, . . .. Given the fact that these large international banks have apparently shown strong interest in acquiring equities of Chinese banks, their relatively slow branch network expansion may be an indication of a relatively prudent and selective manner (p. 5).

Citigroup has displayed adaptability

In 2001, China entered the World Trade Organization