Report

Bus 162 Team 7: HSBC in China 1. | How has HSBC adapted its global strategy to operate in China, both before and after China’s WTO accession? Answer: Prior to the WTO accession negotiations, China’s banking industry operated as a cog in China’s centrally planned economy. The banks adhered to directed lending practices from the government and in turn created some of China’s most successful enterprises, but also supported thousands of other inefficient and unprofitable state-owned enterprises. This practice left state commercial banks with massive amounts of debt that was largely unrecoverable and hordes of nonperforming loans. In 1865, HSBC was founded to finance the growing trade between Europe, India, and China. HSBC rapidly expanded by opening agencies and branches across the globe, but maintained a distinct focus on China and the Asia-Pacific region. By the 1880s, the bank issued banknotes and held government funds in Hong Kong, and also helped manage British government accounts in China, Japan, Penang, and Singapore. After World War I and II, HSBC turned to dramatic expansion through acquisitions and alliances in order to diversify. The bank moved its headquarters in 1993 to London from Hong Kong and continued its global acquisition strategy. In December 2001, China finally acceded to the World Trade Organization (WTO). A number of policies were immediately implemented such as foreign banks were allowed to conduct foreign currency business without any market access restrictions. Foreign banks were allowed to conduct local currency business with foreign-invested enterprises. With its longstanding presence in China, HSBC was among the most well-positioned financial institutions to take advantage of China’s market opening. HSBC is an institution that actively seeks new opportunities; HSBC was the first foreign bank to invest in China in 2001. In 2002, HSBC announced it had taken a 10 percent stake and an additional 9.91 percent in 2005 in Ping An Insurance,