Key Takeaways
- • Citi is positioning its foreign exchange and cross-border businesses to benefit from Chinese companies' overseas expansion and rising global use of the yuan, according to senior executives speaking to Reuters.
- • Citi has recorded double-digit growth in China-related business for several years, among the fastest rates it is seeing in Asia, per Marc Luet, Citi's Japan, North Asia and Australia banking head.
- • Citi's currency business is pitching hedging and derivatives products to Chinese firms expanding into Africa, Eastern Europe, the Middle East and Latin America, with Brazil cited as an example where clients use options as a low-cost hedge.
- • Global FX head Flavio Figueiredo sees the yuan at 6.5 per dollar by mid next year, a gain of nearly 3% from the 6.67 level on the day of the interview.
- • Citi won a licence last month for a fully owned securities business in China, aligning its strategy with Beijing's efforts to expand yuan use despite ongoing trade tensions.
Summary
Citi is aiming to ride the global growth of Chinese businesses and the expanding international use of the yuan to boost its currency trading and cross-border operations, senior executives told Reuters. The strategy aligns the Wall Street bank, which last month received a licence for a fully owned securities business in China, with Chinese authorities' efforts to increase yuan usage, even as trade tensions persist.
Flavio Figueiredo, Citi's global head of foreign exchange, said the bank's role is to help Chinese clients do business abroad, including managing currency risk and invoicing overseas customers in yuan. He noted that Chinese companies have been expanding overseas amid slow growth and intense domestic competition, increasing their exposure to foreign exchange risk. Some have been affected by a slow but steady yuan rally, which can erode the value of foreign earnings.
Revenue from Chinese clients has become one of Citi's most important growth engines. Marc Luet, Citi's Japan, North Asia and Australia banking head, said the bank has recorded double-digit growth in China-related business for several years. Chinese firms are particularly active in electric vehicles, consumer electronics, digital industries and the energy-transition supply chain, sectors where China has developed global competitive advantages. Luet also pointed to growing interest in Central Asia, where Citi has a long-standing presence in markets such as Kazakhstan.
Citi's currency business is marketing hedging and derivatives products to Chinese companies expanding into Africa, Eastern Europe, the Middle East and Latin America. Figueiredo said that in Brazil, where benchmark 10-year yields are nearly 10 times higher than in China, Chinese clients use options as a low-cost hedging tool. Citi is also pursuing Chinese banks as clients in frontier and emerging markets, as they can partner with Citi to deliver hedges in currencies such as the Brazilian real, Colombian peso and Nigerian naira without opening branches in each country.
Figueiredo expressed a reasonably bullish view on the yuan, forecasting 6.5 per dollar by mid next year, a gain of nearly 3% from Wednesday's level of 6.67. He said the currency appeared relatively resilient to recent global market turmoil, with participants viewing it as a more stable, less volatile asset. However, he cautioned that broader adoption and use of the yuan is likely to be a gradual process rather than a rapid one.
Flavio Figueiredo, Citi's global head of foreign exchange, said the bank's role is to help Chinese clients do business abroad, including managing currency risk and invoicing overseas customers in yuan. He noted that Chinese companies have been expanding overseas amid slow growth and intense domestic competition, increasing their exposure to foreign exchange risk. Some have been affected by a slow but steady yuan rally, which can erode the value of foreign earnings.
Revenue from Chinese clients has become one of Citi's most important growth engines. Marc Luet, Citi's Japan, North Asia and Australia banking head, said the bank has recorded double-digit growth in China-related business for several years. Chinese firms are particularly active in electric vehicles, consumer electronics, digital industries and the energy-transition supply chain, sectors where China has developed global competitive advantages. Luet also pointed to growing interest in Central Asia, where Citi has a long-standing presence in markets such as Kazakhstan.
Citi's currency business is marketing hedging and derivatives products to Chinese companies expanding into Africa, Eastern Europe, the Middle East and Latin America. Figueiredo said that in Brazil, where benchmark 10-year yields are nearly 10 times higher than in China, Chinese clients use options as a low-cost hedging tool. Citi is also pursuing Chinese banks as clients in frontier and emerging markets, as they can partner with Citi to deliver hedges in currencies such as the Brazilian real, Colombian peso and Nigerian naira without opening branches in each country.
Figueiredo expressed a reasonably bullish view on the yuan, forecasting 6.5 per dollar by mid next year, a gain of nearly 3% from Wednesday's level of 6.67. He said the currency appeared relatively resilient to recent global market turmoil, with participants viewing it as a more stable, less volatile asset. However, he cautioned that broader adoption and use of the yuan is likely to be a gradual process rather than a rapid one.
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