Cbb in China

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Category: Business and Industry

Date Submitted: 12/31/2013 01:24 AM

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IM Case Study

1. How important is China to BAC? Did BAC do the right thing by taking a minority position in CCB?

2.1. Though it may be not a good idea to enter China, China is important to BAC considering China’s large growth potential in banking business, BAC’s attention to overseas expansion, and the interdependent relationship between China and America in the future.

China’s large growth potential in banking businesses

As of 2003, China’s savings rate was 40 per cent. With China participates more and more in the global trading and development of Chinese economy, there is huge growth potential in China banking sector. Besides, during early 2000s, some banks were hit by corruption scandals and many were seen as efficient which not only said bad words about China banking sector but indicated that China banking business is in low ebb and will have grand development in the future.

BAC’s attention to overseas expansion

BAC has been in one of its most vibrant growth phase and its management was giving much attention to expansion in China. And before Dec. 2006, China was obliged to pursue several reforms in its banking sector as a result of joining WTO, including the removal of all geographic and customer restrictions on local currency businesses and the elimination of any non-prudential measures that restricted the ownership, operation and operational form of foreign-invested banks. Though it looks beautiful for BAC, in fact it may be not. On the one hand, there would be a lot of foreign banks entering China and competition among BAC, other foreign banks and China local banks will be fierce. On the other hand, what Chinese government would actually do and the degree were hard to say.

Interdependent relationship between China and America in the future

In the future, China and America would have more interdependent relationships in politics, economy, trading, etc. Many of BAC’s company customers would do business with Chinese companies or they may...