Citigroup Inc, the biggest US bank, will step up efforts to court Chinese small and medium-sized enterprises (SMEs) as its business in that sector generated triple-digit growth last year.

 

The first group of overseas lenders will soon be issued with licenses to conduct business as local entities, after which they will compete with domestic rivals in various fronts, especially in renminbi retail business, wealth management and corporate financing.

 

Citigroup, which holds stakes in Shanghai Pudong Development Bank and Guangdong Development bank, plans to add about 1,000 workers to its China operations this year, boosting its staff strength in the country to around 4,000, the lender's chief executive for China business, Richard Stanley, said yesterday.

 

He also said Citigroup was keen to engage in brokerage business and would launch the operation once regulatory restrictions are removed.

 

But the lender, which runs 16 outlets across China, has decided to expand heavily its SME business and broaden client relationships in southern, eastern and northern China.

 

"Although SMEs have become a powerful impetus behind China's fast-growing economy, they still face difficulties in addressing various operational and financing issues," said Henry Zhang, China's commercial banking head at Citigroup.

 

Figures released by the China Banking Regulatory Commission this week indicated that outstanding bank lending to Chinese SMEs reached 5.35 trillion yuan at the end of 2006, an increase of 15.8 percent from the beginning of the year.

 

SMEs, usually companies with annual revenues of less than 30 million yuan, accounted for only 23.7 percent of total yuan loans, though last year's growth rate was slightly higher than the 15.07 percent rate for all loans.

 

The overall non-performing loan ratio at Chinese commercial banks was 7.09 percent at the end of December.

 

Even though Chinese banks are usually less enthusiastic when it comes to SMEs, the sector has aroused the interest of many overseas lenders.

 

HSBC, Europe's biggest bank, aims to attract smaller enterprises with products and services designed for them, according to Neil Tottman, head of commercial banking at HSBC China.

 

Britain's Standard Chartered last year launched a new initiative to offer financial solutions to SMEs in China and Africa venturing abroad.

 

(China Daily March 15, 2007)