HSBC In China

Topics: Bank, Financial services, World Trade Organization Pages: 6 (1977 words) Published: April 18, 2015
In 1865, Hong Kong and Shanghai Banking Corporation (HSBC) was founded to meet the demand for local banking facilities in Hong Kong and on the China coast. The increasing and frequent trade was undertaken between Europe, India, and China, which contributes to the extension of the bank. HSBC now is one of the world’s largest banks with extensive international operations. Although the bank rapidly expanded across the globe, HSBC retained a clear focus on China market. In view of these changes of HSBC’s China strategy, it may be instructive to examine how banking environment and police of China changed over the years. Upon China’s accession to the WTO, foreign bank were allowed to enter China’s bank sector. HSBC seized the tremendous opportunity to strengthen its presence in China. This essay will begin by examining the evolution of HSBC’s Strategy in pre-WTO and post-WTO China. Next, It turned to analyse the impetus to these changes of HSBC’ China strategy. In the following part, this essay will introduced the background of HSBC expanding in China’s rural areas and evaluated this strategy from advantages and disadvantages aspects. Having presented the HSBC’s presence and strategy in China, the paper then analyses HSBC’s operating in other emerging markets with the evidence from India and Argentina. Moreover, the data and facts will be provided to evaluate the operation of HSBC during the recent world economic crisis. The further research about the reasons that Asian was identified by HSBC for future opportunities will be presented followed. The final section presents some conclusions and relates those to the operation of international business to provide some advice. Prior to the WTO accession, China’s market was not open up to foreign competition. In China’s centrally planned economy, the function of the state commercial banks was misplaces as a social function rather than economic function. Commercial banks had to adhere to the government to lending practices. There are massive amounts of unrecoverable debt and nonperforming loans in China’s banking industry which hampered the economic return of the banks. HSBC anchored its position as the dominant foreign bank in China with its achievements in government finance. By the end of its first decade of operations, HSBC’s particular focus was financing trade along the China coast. Being a banker to the government of Hong Kong and acting as joint banker to handled British government’s Chinese accounts, HSBC strengthened its presence and reputation in China by the 1880s. In 1876, the bank issued the first public loan of china and subsequently issued most of China’s public loans. After the First World War, HSBC turned to fortify its presence in Asian markets by dramatic expansion through acquisitions and alliance. The bank played an active role in continued expansion into China market and opened a series of branches. As one of the paramount financial institution in Asia, HSBC took a primary role to stabilize the Chinese national currency after the War. The acquisition strategy consolidated the bank’s position as a global financing institution. In December 2001, China acceded to the World Trade Organization (WTO). With the membership of WTO, it allowed China to integrate into the world economy and offered a more liberal environment for foreign investor (World Trade Organization, 2005).A number of policies were immediately implemented which contributes to the liberalization of China’s banking sector. HSBC had afully seized this chance to try to transform its long-term position advantages to stronger competition in China. In 2001, HSBC was the first foreign bank to invest in China. The transformation of the strategy contributed a more aggressive expansion for HSBC. The entering and expansion of non-bank services is one of the HSBC’s strategies to tapped China market. HSBC took a 10 percent stake in 2002 and an additional 9.91 percent in 2005 in Ping An Insurance which was China’s...
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