An argument against Citigroup in China Chinese regulations have historically limited the operations of foreign banks, but with China's entry into the World Trade Organization (WTO), This is all set for change- in theory. Geographic limitations on foreign banks are to be lifted by December 2006, along with a series of other restrictions that have stunted the growth of Western banks and China's banking sector as a whole. Progress on liberalization has been slow, however, and Chinese regulators have even put in place other limitations that will harm competition in the long term. This is far from the only problem facing China's banking sector. Decades of political loans have saddled the four state-owned banks with an unhealthy level of non-performing loans from state-owned enterprises. Portfolio management companies have been created to manage these bad loans, but the situation is far from stable. The lack of corporate governance has also created an environment in which bank management is opaque and corruption is widespread. The risks inherent in this sector are great. In mid-2005, Citibank faced significant obstacles to its growth in China. It worked hard to become the country's dominant foreign bank in the hope that the country's banking sector would be open to all competitors...... middle of paper ...... as well as the first international bank to launch two new investment products, Premium Accounts and Market Linked Accounts, in China (www.citigroup.com/citigroup/press/2005/050304a.htm.) Although these are important developments, the Citibank's growth rate was non-existent in its Chinese markets. operations. The regulatory changes Citibank expected never materialized, and as a result, the bank was unable to offer many of the services most important to profitability in China. REFERENCES « China: Citibank opens a new consumer banking branch in Shenzen. » Corporate press release, March 4, 2005. Accessed at http://www.citigroup.com/citigroup/press/2005/050304a.htm. Gordon G. Chang, The Coming Collapse of China, (Random House, New York, 2001), page 124.