By Samuel Shen and Engen Tham
SHANGHAI, Nov 12 (Reuters) – Citi is aiming to ride Chinese businesses’ global growth and the expanding use of the yuan around the world to boost its currency trading and cross-border businesses, senior executives said.
The strategy aligns the Wall Street bank, which last month won a licence for a fully owned securities business in China, with Chinese authorities’ efforts to drive up yuan use, even as trade tensions bubble.
“Our role is to help Chinese clients do business abroad,” Flavio Figueiredo, Citi’s global head of foreign exchange, told Reuters in an interview on the sidelines of the bank’s annual China conference in Shanghai.
That includes helping clients manage currency risk and invoice overseas customers in yuan, he said.
Chinese companies have been turning abroad amid slow growth and cut-throat competition at home, increasing their exposure to foreign exchange risks. Some have been hit by a slow-but-steady yuan rally, which can erode the value of foreign earnings.
At the same time, revenue from Chinese clients has become one of Citi’s most important growth engines.
Citi has recorded double-digit growth in China-related business for several years, among the fastest rates it is seeing in Asia, said Marc Luet, Citi’s Japan, North Asia and Australia banking head, in a separate interview.
Chinese firms are particularly active in sectors where China has developed global competitive advantages, including electric vehicles, consumer electronics, digital industries and the broader energy-transition supply chain, said Luet.
“We’re seeing a lot of interest and bridges towards Central Asia,” Luet said, noting Citi’s long-standing presence in markets such as Kazakhstan.
BULLISH ON YUAN
Citi’s currency business is also pitching its hedging and derivatives products to Chinese companies expanding into places like Africa, eastern Europe, the Middle East and Latin America, Figueiredo said.
In Brazil, where benchmark 10-year yields are nearly 10 times higher than they are in China, Citi’s Chinese clients use options as a low-cost hedging tool, Figueiredo said.
Citi, which describes itself as the world’s biggest foreign exchange dealer, is also pursuing Chinese banks as clients when it comes to frontier and emerging markets.
“For financial institutions in China, it’s typically easier for them to partner with a bank like Citi to help them deliver Brazil real hedges, to deliver Columbia peso hedges or deliver Nigerian naira hedges … without having to open a branch in each one of these countries.”
On the market, Figueiredo’s view on the yuan’s outlook is reasonably bullish. An expectation it could reach 6.5 per dollar by mid next year would be a gain of nearly 3% from Wednesday’s level of 6.67 per dollar.
The yuan appeared relatively immune to the recent global market turmoil, with market participants perceiving the currency “as a more stable, less volatile asset,” Figueiredo said.
Still, that does not necessarily mean it is going to be adopted or used more widely in a hurry, something likely, he said, to be a gradual process.
(Reporting by Samuel Shen and Engen Tham in Shanghai, additional reporting by Selena Li in Hong Kong; Editing by Saad Sayeed)
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