- The Washington Times - Wednesday, February 4, 2004

SHANGHAI- Chinese who travel overseas for the first time will be able to carry a foreign-branded credit card that they can use at both ends of the trip. Citibank yesterday announced that it has partnered with a local bank to offer a foreign-branded credit card aimed at the fast-growing ranks of newly affluent Chinese who are just beginning to awaken to the possibilities of paying with plastic.

The partnership with Shanghai Pudong Development Bank offers Citibank the chance to get its brand name distributed nationally. The cards will be issued by Pudong Development Bank but also carry the Citibank logo.

“As consumer spending becomes an increasingly important driver of economic growth for China, credit cards will have an ever-increasing role to play,” said Charles O. Prince, chief executive officer of Citi parent Citigroup Inc. “We’re exploring a number of options to expand our business here.”

The two banks paraded floats through the streets and unleashed blue balloons into Shanghai’s slate gray skies yesterday to announce the partnership.

The cards initially will be available only to Shanghai residents. They can be used both inside China and overseas, and users have access to a round-the-clock customer service line and card-replacement service.

Last year, almost 250,000 people from China and Hong Kong visited the United States, according to the Commerce Department.

As China eases restrictions on foreign banks ahead of a full opening of the banking sector by 2006, local banks are joining with foreign partners to boost competitiveness by upgrading their products, management and technology.

China began developing a credit-card system with the 1986 debut of the Great Wall card. According to industry estimates, about 570 million bank cards have been issued, but almost all are debit cards that draw money directly from consumers’ bank accounts.

Plans to develop a consumer credit market on the mainland face serious hurdles, chief among them the lack of a national bank-clearing system and a paucity of credit records. Local banks are already being burned by delinquent home and auto loans.

“Once Chinese people get the idea that they can get free money easily, this is bound to be a problem,” said Wei Yen, China banking analyst for Moody’s Investors Service.

Similar problems have grown to crisis proportion in neighboring South Korea. But Mr. Prince said Citigroup did not view the fast expansion of China’s credit market as “a bubble.” In any case, he said, “We have a very strong approach to dealing with credit.”

Pudong Development Bank’s chairman, Zhang Guangsheng. called the new card a “turning point” for his bank, which has 290 branches.

“It will further strengthen SPDB’s competitive edge in the market,” he said.

At least two local banks offer similar, domestically branded cards, and last month international competitor HSBC Holdings began issuing a foreign-currency credit card with partner Bank of Shanghai that it hopes will be popular with Chinese traveling abroad.

Citibank has been operating in Shanghai since 1902. It holds a 4.6 percent stake in Pudong Development Bank, China’s ninth-largest commercial bank, an arrangement intended as a platform for expansion here.

Like other multinationals, Citi sees in fast-growing China potential for expansion that can be found in few other markets. The bank employs 1,000 people on the mainland — 70 percent of whom are Chinese — and is recruiting Chinese staff for training overseas.

“We have very, very big plans for China,” Mr. Prince said. “China is a strategic priority for Citigroup.”

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