The management challenge @ Citi

One of the most coveted corner offices in global corporate world has an in Vikram Pandit, a person of Indian origin as an occupant. The challenge for the new boss at the corner seat of citi is to ensure that he does not get cornered.

He comes to Citi when the banking giant faces four major risks. The first is the possibility that the sub prime crisis may yet cost the wall street major more than the $11 billion that it has already written off. The second comes from a very real possibility of a US recession. The third peril is held out by the increasingly vocal shareholders who have seen an alarming 40 per cent decline in the value of the city stock over the last one-year. The fourth threat looms in terms of cultural and integration issues that will inevitably crop up from the investment of $7.5 billion that the Abu Dhabi sovereign investment fund has pumped into the troubled bank. That investment is on top of the nearly 4 per cent stock that a Saudi prince already holds in the bank.

Will Pandit measure up to all these risks and other yet unknown pitfalls? Alas his past as a manger of a hedge fund and head of institutional securities at Morgan Stanley does not give much hint of his ability to manage a bank of this vast scale.

He has talked of cost cutting as a priority. Clearly this is needed but it is something new at Citi which has been build on an expensive and aggressive growth path by acquisitions and expansion during the legendry Sandy Weil era. The problems at Citi are clearly deep set and will cause pain. Analysts are nearly unanimous in their opinion that some of the bank’s business may even have to be put on the block. That is never an easy decision especially for a relative outsider. Wall street watchers have hinted that Citi’s belligerently built credit card division may have to go. The job hasn’t started on a positive note for this global India. His former employer Morgan Stanley has put sale on citi the day Pandit took over. He will have to prove them wrong and that will clearly take some doing

china changes investmnet rules for foreigners

Red storm rising
By ninad d sheth
China the sleeping giant invoked by Napoleon’s famous dictum woke up long ago. Now it is changing tracks in a manner that may prove to be a wake up call for the emerging markets and the G-8 alike. The changes in policy may lead to the undoing of the well-known flat world thesis by Thomas Freedman. A lot is at stake as China changes track from foreign funded to domestically driven economy.
On the one hand, China is unleashing a fresh set of measures that restrict foreign investment directly into the corporate sector, and on the other hand it is leveraging its treasure chest of $1.2 trillion foreign reserves through a sovereign fund that will invest in overseas assets.

Three measures to restrict foreign investment could change the global capital flow matrix. Firstly, Sectors where Chinese firms must have majority ownership are proposed to be tripled from the current shortlist. Thus a new investor may find himself unwelcome in several sectors that where hitherto open.
In manufacturing in particular, new restrictions are applied to ownership of factories that manufacture finished goods exclusively aimed at the export markets. Currently, according to an HSBC report foreign entities fully own 300,000 factories in China that produce everything form toys to machine tools. The fact that non-Chinese own such huge assets in China has already caused social disharmony. In the flat world, ownership was supposed to be irrelevant as long as the people get the jobs and growth was triggered through interlinked globalised exports. Except the Chinese want all that - and more. Chinese are yarning to own assets. Just as a contractor would one day like to be the supplier in a market place so are the Chinese ready to move up the ladder and its bring policy measures to ensure the transition.

Proposals are underway for press note one with Chinese characteristics. New measures have been introduced for joint ventures that will have to get through the first right of refusal.
Financial curbs are the third factor that will restrict globalization as we know it. In China foreign Banks are finding it difficult to open branches and consolidate. More licensing is likely in the financial sector in China.
In sum the Chinese are turning away for the model that fuelled their growth for the last twenty-five years. And all this while the Chinese sovereign fund merrily takes up stakes in such American majors as the hedge fund Blackstone. Globalization as we know it may just end up getting some Chinese characteristics.