Citi Targets Chinese Global Expansion and Rising Yuan Use to Grow Currency Business

Citi is seeking to expand its foreign exchange and cross-border banking businesses by capitalizing on the international growth of Chinese companies and the increasing use of the yuan in global trade, according to Reuters.

The strategy positions the Wall Street bank to benefit from Beijing’s efforts to promote the yuan as an international currency, even as trade tensions persist. It also builds on Citi’s growing business with Chinese companies, many of which are expanding overseas as economic conditions and competition at home push them to seek new markets.

“Our role is to help Chinese clients do business abroad,” Flavio Figueiredo, Citi’s global head of foreign exchange, told Reuters in an interview on the sidelines of the bank’s annual China conference in Shanghai.

That includes helping Chinese businesses manage currency exposure and invoice overseas customers in yuan, he said.

The push comes as more Chinese companies establish operations and commercial relationships outside their domestic market. Their overseas expansion creates demand for foreign exchange services, particularly as revenues and costs become spread across multiple currencies.

Currency movements can also complicate that expansion. Experts say a gradual appreciation of the yuan, for example, can reduce the value of foreign earnings when converted back into the Chinese currency. This means companies with significant international revenues therefore need tools to manage exchange-rate fluctuations and protect profit margins.

This demand represents an important source of growth for Citi. Revenue from Chinese clients has become one of the bank’s major growth engines, while China-related business has recorded double-digit growth for several years, according to Marc Luet, Citi’s head of banking for Japan, North Asia and Australia.

Luet said the growth rate was among the fastest Citi was recording across Asia.

Chinese businesses are expanding most actively in industries where domestic companies have developed strong global positions, including electric vehicles, consumer electronics, digital industries and the wider energy-transition supply chain, Luet said.

Their expansion is creating opportunities for international banks that can provide financing, payments and currency-risk management across several markets.

Citi is especially interested in the commercial links emerging between China and Central Asia. Luet said the bank was seeing substantial interest in the region, where its established presence in countries such as Kazakhstan gives it an existing platform to serve Chinese clients.

“We’re seeing a lot of interest and bridges towards Central Asia,” he said.

The bank is also targeting Chinese companies expanding into Africa, Eastern Europe, the Middle East and Latin America. Figueiredo said Citi was marketing its hedging and derivatives products to businesses operating in these regions, where currency movements can create significant uncertainty for companies receiving payments or meeting expenses in local currencies.

In Brazil, for example, Chinese clients use options as a relatively low-cost way to manage currency exposure. Figueiredo pointed to the difference between Brazilian and Chinese government borrowing costs, noting that benchmark 10-year yields in Brazil are nearly 10 times higher than those in China.

That gap illustrates the different financial and market conditions Chinese companies encounter as they expand into emerging economies. Currency options can help them manage the risk of exchange-rate movements without requiring them to take large positions in the underlying currencies.

Citi is also seeking to deepen relationships with Chinese financial institutions, including banks that need access to foreign exchange products in markets where they have limited operations.

“For financial institutions in China, it’s typically easier for them to partner with a bank like Citi to help them deliver Brazil real hedges, to deliver Colombia peso hedges or deliver Nigerian naira hedges … without having to open a branch in each one of these countries,” Figueiredo said.

The model allows Chinese banks to offer clients access to currencies and hedging instruments across emerging and frontier markets through an established international banking network. For Citi, it creates another channel to generate business from China’s expanding financial and corporate links abroad.

Citi’s strategy also reflects its confidence in the yuan’s outlook, although Figueiredo expects its international adoption to advance gradually rather than through a rapid shift in global currency use.

He said the yuan could strengthen to 6.5 per dollar by the middle of next year, compared with about 6.67 per dollar on Wednesday. That would represent an appreciation of nearly 3%.

The currency has remained relatively resilient during recent global market volatility, Figueiredo said. Some investors and market participants see it as a more stable and less volatile asset compared with other currencies.

That perception could support demand for the yuan in international transactions, particularly among companies and financial institutions with growing commercial exposure to China.

However, greater currency stability does not automatically translate into widespread international use. The yuan still faces the challenge of gaining a larger role in trade invoicing, cross-border payments and financial markets outside China.

Citi’s approach is therefore focused on the practical needs of Chinese companies and banks operating internationally. Helping businesses invoice in yuan, manage foreign exchange exposure and access local currencies could gradually expand the currency’s use in commercial transactions.

The bank’s China strategy also has an important commercial consideration. As Chinese companies extend their reach into emerging markets, they need financial partners with established local networks and the capacity to manage transactions across different regulatory and currency environments.

Citi’s recent approval for a fully owned securities business in China adds to its presence in the market. Its wider ambition is to connect Chinese companies and financial institutions with overseas opportunities while expanding its own currency trading and cross-border revenue.