Vietnam the major centre for Citi’s Asian strategy

Marc Merlino, global head of Citi’s Global Subsidiaries Group

Could you describe Citi’s Global Subsidiaries Group (GSG) and its presence in Asia?

The GSG is one of Citi’s fastest-growing businesses, providing institutional banking solutions to the subsidiaries of our multinational corporation (MNC) clients. The GSG franchise plays a vital role in supporting our clients’ growth, not only across Asia but globally as Citi operates physically in 100 markets, and we bank many clients in multiple markets. Asia is a core part of the GSG franchise with a presence across 16 markets in the region.

The team’s priority is supporting MNC clients as they expand across Asia, and this includes global names and the increasing breed of Asian corporate titans across technology, auto, and consumer industries, among others. Citi is the largest global bank present in Asia, while the region’s total revenues are a quarter of our global revenues. This strongly connected network with local banking licences is a competitive advantage for banking operations. We have also built up a strong network of desks around the world to support Asian clients as Asian companies increasingly expand globally. Citi now has over 30 Asia desks including 12 Japan desks, 11 China desks and nine Korea desks. One of our fastest growing desks is the Korea desk here in Vietnam. These desks include local bankers working alongside local language speaking bankers who support South Korean MNCs in Vietnam. This has been a successful strategy that has brought us closer to our clients allowing us to capture a greater market share of their business.

How important is Citi Vietnam in Asia and can you elaborate on Citi’s regional strategy?

Vietnam is one of Citi’s fastest-growing markets globally, and is vital to the region’s growth strategy. Our history in the market dates back to 1994 when Citi became the first US financial institution to open a branch in the country.

In Vietnam, we opened a Japan desk in 2017 and a Korea desk in 2018 to support Japanese and South Korean companies as they look to expand their businesses in Vietnam. The team also recently held the Vietnam Day in Singapore and Taiwan for clients based in these markets to broaden their understanding of the business environment in Vietnam and the opportunities that the country offers. Vietnam continues to present many opportunities for global companies with a fast-growing, digital-savvy middle class and a government supporting foreign investment through trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the EU-Vietnam Free Trade Agreement. Vietnam’s economy has maintained its strength despite global uncertainties, and our economists project a GDP growth rate of 6.7 per cent this year and in 2020. In the Asia to Asia corridors, we see a strong client growth of double digits as evolving supply chains see more cross-border trade happening. Our prioritised corridors include South Korea to the ASEAN, China, and India, as well as Japan to the ASEAN and China, and China to the ASEAN bloc. The biggest growth in 2019 has been along the South Korean-ASEAN corridor, primarily driven by flows into Vietnam. Intra-Asia trade is capturing a greater share of global trade, and we expect to see continued strong growth as intra-Asian trade corridors expand further, especially through the ASEAN.

What is your outlook for trade in Asia amid the current trade issues?

Our outlook is that trade and globalisation will not go away or even dramatically diminish. Trade flows are already shifting towards markets where opportunities and costs are attractive and local technologies and infrastructure are in place – including Vietnam. Ongoing US-China trade tensions will lead to supply chain reconfigurations, with a number of companies reorganising production locations and supplier relationships. Supply chains will become nimbler and more flexible. Thus, a global network is an increasingly competitive advantage – and we already do business in 160 markets around the world every day.

While all eyes have been focused on the trade tensions between the United States and its trading partners, the great bulk of world trade – about 80 per cent – does not flow through the US. Investment flowing from out of and within Asia will grow further, moving in tandem with the expansion of new intra-Asian trade corridors. Currently, two-thirds of China’s outward foreign direct investment now flows to Asian countries. Concrete signs of this deepening integration are easy to spot on the ground. Popular examples are Samsung’s presence and Xiaomi’s activities in India. We expect to continue to see a rise of these types of investment flows in the time to come.

Also fueling our optimism are the conversations we have with our 13,000 clients which range from smaller clients to MNCs. Concerns about policies will remain front-and-centre until new, more ­settled arrangements are hammered out among and between trading partners. However, as a bank with more than two centuries of experience and deep roots in trade finance, we believe what we are witnessing is an evolution, not a contraction, of trade.

With a global network and in-depth local expertise in each of our markets, we are uniquely positioned to advise our clients while they think through this evolutionary process and the potential future optimisation of their operations and supply chains.