Citigroup will launch an investment banking division in China to further its involvement in China’s financial markets, even though rivals are becoming more cautious in the country.
A person familiar with the matter said that the large US bank plans to launch its wholly-owned China-based unit before the end of this year. Citi would be expanding its business in China which already includes corporate loans and other banking services.
Citi’s application for a broker license was conditionally granted in late December. This decision allows it to begin hiring employees for its new unit.
Reuters was first to report on the filing and other details about Citi’s expansion plans. Citi declined to make any comments on the filing.
Other large US banks have also become more cautious about their operations in China. Goldman Sachs CEO David Solomon, Speaking In November, he said that the bank would reduce its activities in China due to growing tensions between Washington, D.C., and Beijing.
Solomon stated that five years ago Goldman executed a strategy of “growth at any cost in China”. Today, we are taking a more cautious approach, and have probably reduced some of our resources in China, just because the uncertainty is greater.
Western banks struggle to get traction in China due to geopolitical tensions, and the slowdown of the economy.
Data from the Chinese government shows that foreign investment banks were involved in three of 313 initial public offerings (IPOs) last year. Goldman Sachs, JPMorgan Chase and other US banks have only completed three IPOs since 2021 when they became the two US banks with wholly-owned investment banking units in China.
Foreign banks are also reluctant to expand in China due to the government’s increasing involvement in the financial sector. In recent years, China’s banking and stock regulators asked foreign banks to study Xi Jinping Thought – the president’s mantra – while reducing salaries in the name of the “common prosperity” campaign.
Jane Fraser, Citi’s chief executive, has reiterated the bank’s commitment towards its Chinese operations. Fraser met with regulators in China in the past year. She was also one of a group of US executives who attended a Dinner in San Francisco, in November.
Citi, who had previously provided investment banking services via a local partner in China, applied for a Chinese broker license at the end of 2021. A Chinese data law passed in 2021 that requires foreign firms to have their own infrastructure before they can start a securities firm has slowed down the application.
Chinese law also requires foreign owners to employ at least 30 people. Citi plans to hire more employees at its China operations than the minimum required, according to a person familiar with the situation.
Citi is undergoing its biggest restructuring in over a decade. A big part of this involves reorganizing its management around business lines rather than geographical regions.
Citi will provide additional details about the restructuring next week when it releases its results. has already announced hundreds layoffs.