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Autor:  anton  24 March 2011
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Analyzing Citigroup’s Adaptability in China


There are different indicators of adaptability. A company is deemed adaptable if it is able and continues to be innovative and competitive 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 presence in China, despite the potential changes in the Chinese environment as a result of their entering the 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. However, it was an overwhelming consensus that Citigroup, in fact, displayed a tremendous level of adaptability. To this end, the arguments and the evidence for adaptability far outweighed those of whether Citigroup did not display 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 highly 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 adapt while trying to grow its operations in China.

The merger between Travelers and Citicorp was finalized in 1998, resulting in the emergence of a new company: 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, including 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 foreign expansion into the country. Other challenges facing any foreign entity 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 was, other than banking services, what 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. In his article “Moves in Europe, China for Citi”, Tim Mazzucca reported that the organization, in its continued quest to hire qualified staff, has recently hired an experience Chairman and CEO for its foreign consumer business and continues to receive good reports on its ventures in China” (2006, p. 20). Mazzucca further reported that several “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 Citigroup’s CEO, Richard Stanley, as saying “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). This showed Citigroup’s commitment to continue produce goods and service, which pleases its customers, thus emphasizing the corporation’s ability to adapt to its environment.

Citigroup already had 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 the 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 (U.S. News). As a result of economic reforms in China, Citigroup predicts the Chinese consumer will increase demand for credit cards. Less than 5% of China’s population has a credit card, compared with 80% in the U.S. Citigroup is already in partnership with a local bank in offering dual currency credit cards (U.S. News). Citibank obtained approval from the Peoples Bank of China to offer full service Internet banking services to domestic and international businesses and Chinese consumers (

Arguments Supporting Non-adaptability

For two years Citigroup was unable to gain strategic positions in the Chinese banking market. Over these two years, the entity had to watch rival Bank of America (BofA) gain a 9% stake in the China Construction Bank (CCB), one of the country’s four biggest lenders. Citigroup also lost a promising position as advisor to CCB on multi-billon-dollar flotation (Economist, 2006, p. 65). Citigroup, despite being able to out bid other foreign banks such as Netherlands ABN Amro and France’s Societe Generale for Guandong Development Bank (GDB), had to pay a price 2.3 times the book value for GDB, in comparison to BofA’s 1.15 times for CCB. GDB’s liabilities outweighed its assets by 35 billion yuan. GDB’s capital-adequacy is below that of international standards and its profitability is low. Citigroup was forced to restructure in order to proceed with this deal (Economist, 2006, p. 65). Citigroup, in order to move ahead, has been making deals, which may compromise its core business venture and profit margin. Citigroup’s purchase of 4.6% of Shanghai Pudong Development Bank is proving to be burdensome, as it had to promise not to invest in any other mainland bank without Pudong’s permission. This agreement was granted with further stipulation that Citigroup increase its stake in Shanghai bank to 19.9% at a rumored cost of $800 million, which is four times the original cost per share. Another stipulation was that Citigroup agree not to set up a joint-venture with GDB in credit cards, which is deemed China’s most promising financial business and the only one in which Guandong bank seems to have expertise (Economist, 2006, p. 65).

Citibank’s recent investment strategy in Chinese banking is not altogether in keeping with their previous paradigms which kept them in check from dealing with, and operating in-tandem with, Chinese banks. For example, the history of Chinese assimilation is well known, and the company could risk compromising proprietary network technology, databases, and other intellectual property by migrating their operations over to Chinese partners. The change in methods smells of impatience with the progress of inroads to sustainable profitability with personal banking products.

Citibank’s proven successful paradigms for emerging markets include contributing directly to those markets into which they seek to enter. For example, in China Citibank helped the Peoples’ Bank address its problems with auditing and internal controls by education – a clear non-financial contribution, which could gain them a great deal of long-term good-will if the wind blows in the right direction. However, in the case of a resurgence of Chinese nationalism and/or strict Communism, Citibank risks a greater loss than some of its competitors from the monetary and time expense involved.


Considering that the banking sector was one of the most litigious areas during China’s WTO negotiation processes, and the limitation on services that foreign banks were permitted to perform once they were allowed in the Country, the Citibank entry is adaptive.

In the best case, China’s current advancements into a free-market economy would provide international banks a new set of conditions that could put them in a better position to compete. A combination of current key events can change the banking scenario considerably. In, one hand, there are factors such as the problems that China’s domestic banks are facing: corruption, massive debt, deficient management, and lack of transparency as well as government efforts to counterbalance those problems by persuading banks to go public. In the, other hand, there are the expectations that soon international banks would be able to expand the services they are permitted to provide. As PricewaterhouseCoopers Chinese Business Network exposed in its June publication:

Citibank’s focus on working closely with local banking, in lieu of working around China’s understandably restrictive early bank trade policies, should prove adaptive in time, as the country continues to align it legal, political and economic systems, to achieve benefits sought from WTO membership. Citibank strategies, including hiring local employees, educating local employees in management and operations, and working with the Peoples’ Bank on training and internal auditing/controls initiatives, should help foster long-run trust in the company and its motives.

Since 2001, Citibank has addressed the difficulties in dealing with Chinese banks on their terms; and should achieve superior results in the long-term over competitors like Bank of America, if they continue to work closely with the Chinese in the spirit of mutually beneficial exchange of technology and knowledge. Citibank reduces resistance to its agenda by offering those leverage-able values, without the risk of being perceived as attempting to take profit from Chinese industrial success without a contribution.

If however a more nationalistic mindset ever again prevails in China, or if the Chinese spirit of adapting the WTO proves to be some sort of grand ruse to assimilate successful banking technology and methods to fix their internal economic problems, then Citibank stands to lose like the rest of foreign bankers – perhaps worse, because of their investments in the Chinese people.

References (2003). Citibank granted internet banking license by Central Bank in China. Retrieved September 9, 2006 from (2006). Retrieved September 8, 2006 from

Economist. (2006). A Chinese coup. 378(8459), 65. Retrieved September 11, 2006 from EBSCOHost database.

Eurocatalyst. (2004). Sustaining catalyst sponsor: Citigroup. Retrieved September 8, 2006 from

Mazzucca, T. (2006). Moves in Europe, China for Citi. American Banker. 171(153), 20. Retrieved September 10, 2006, from EBSCOHost database.

Newman, R. (2005). The rise of a new power. Retrieved September 8 from

Shuli, H. (2003). Citigroup's success, China's success. Caijing Magazine 101. Retrieved September 8, 2006 from

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