Going Global & Managing Global Businesses Case Study

HSBC’s Long Term Commitment Delivering Results in China

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Abstract:
12 December 2006 was a remarkable day in the history of the Chinese banking industry, when China Banking Regulatory Commission (CBRC) allowed foreign banks to do retail business in domestic currency yuan renminbi (RMB) without any geographic restrictions. Hong Kong and Shanghai Banking Corporation (HSBC) Limited became one of the first banks to receive such a license. In accordance with the new rules foreign banks, which already had approval to provide RMB banking services to domestic companies, could offer the new deposit service to Chinese citizens before incorporating locally. HSBC rolled out the new time deposit service in nine cities where it had already been providing RMB banking to domestic companies and non-resident individuals. HSBC had focused on the Chinese market long before the foreign players, rushing their investments as a result of China's opening up of the banking sector under its World Trade Organisation (WTO) commitment. Established in Hong Kong and Shanghai in 1865, HSBC had entered into numerous strategic partnerships in mainland China. Reflecting its long-term commitment to the country, HSBC moved its China head office from Hong Kong to Shanghai in May 2000. In fact, HSBC was the only foreign bank which aimed at business development in China's interior regions. The bank's reputation as the best foreign bank in China's US$4.9 trillion banking market made HSBC one of the major forces to reckon with. Going forward, HSBC wanted to become a major player in China over the next seven to ten years through operating in all areas of the financial services sector. But, the growing number of foreign players, China's complex regulatory system and protests against job outsourcing would stand as a major hindrance to its long term objectives.

Pedagogical Objectives:

• To understand the changes in the banking sector after China's entry into WTO
• To understand the pros and cons of concentrating in the Chinese banking market
• To have a brief understanding of how foreign investments in the form of strategic partnerships will help Chinese banks.

Keywords : Hong Kong and Shanghai Banking Corporation (HSBC); China; Bank; World Trade Organisation (WTO); Retail; China Banking Regulatory Commission (CBRC); Non-performing loan (NPL); Joint-stock commercial bank (JSCB); Shanghai; Ping; Bank of Communication; Fujian; Financial crisis; Outsourcing; Managing for growth