Citigroup is used to getting its own way, so its recent travails in China must be painful. It made its China move earlier than its rivals, most conspicuously HSBC, by buying a 4.62% interest in Shanghai Pudong Development Bank in 2003. But Citigroup has failed to capitalize on its head start, despite strenuous claims to the contrary.
One statistic tells the story. Citigroup’s credit card joint venture with SPDB, the key reason for its original investment, boasts 300,000 jointly issued cards. In a little less than a quarter of that time, HSBC’s credit card business with its partner Bank of Communications, China’s fifth-largest lender, has issued more than 650,000 joint cards. HSBC and Bank of Communications already enjoy significant levels of cooperation in other areas too, principally retail and commercial banking.
Stung by its rival’s success, Citigroup now wants to swap partners and is in the final throes of an investment in Guangdong Development Bank (GDB), China’s 11th-largest lender, in which, if it gets its way, it aims to exert management control.
Chinese wives are not easily jilted, however, and SPDB is exacting a high price for Citigroup’s infidelity, forcing the bank to exercise its option to purchase 19.9%