Bank of America Essay

Words: 2151
Pages: 9

Internation Business Case Study

Bank of Amerian and
The Chinese Credit Card Market

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

We considered that Bank of America’s taking minority position in CCB (9 percent, as stated from the case) is an adequate decision. Looking at the situation from the perspective of a firm in search for successful overseas expansion, we considered that CCB - one of the largest commercial banks in China - could serve as a profitable business partner. A big advantage is that CCB has relationships with many of the largest business groups and leading companies in industries strategically important to China's economy. Another is that CCB already
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By 2003, three million credit cards had been issued in China showing a rapid growth in use of credit cards and the number is expected to reach 50 million in 2006. China’s credit card market is still in a growing phase having high potential to grow further, but a huge risk also exists.

There are three main key factors that make the credit card market enticing. Firstly, Chinese economy has a sustainable growth and GDP per capita keeps increasing. These factors would lead to an increase in credit card usage as well. Since 2001, it has experienced average 10% of economic growth and rise in GDP per capita which resulted in disposable personal income. A big opportunity exists in China as number of credit card per capita is much smaller than other countries like U.S.A and South Korea.

Another attractive element is some changes in the Chinese government policy. Until late 1990s before privatization of housing ownership, China’s banking industry was restrained to corporate banking. After the private ownership was allowed, China’s personal banking sector has been developed along with a huge increase in housing loans and car loans. Moreover, after 2003, the Chinese government has set up a policy to use consumption as an economic growth engine. As a result, it can be viewed that Chinese consumption would be more active which would vitalize both banking and credit card