Archive for November 20th, 2006

Citigroup Encounters Hurdles to Retail-Banking Plans

This article appeared in the Wall Street Journal on November 10, 2006. This article is about the banking market in China and the ongoing issue of foreign banking in China.

Citigroup (the article’s main focus) and other non-China based banks are facing difficulties gaining access to the market. Foreign banks have been forced to do business through Chinese banks and have yet to deal with individuals. China has been slowly taking steps to allow these banks to open branches and put ATM’s on their soil in order to reach their potential “bankable” population of 300-400 million individuals. However, new rules and regulations have slowed this progress, if not set it back a step. It is very informative article on a topic that could have a huge effect on the way banking in China is going to be done in the upcoming years.

Here are some questions to think about while you read the article.

What are you interpretations for the future based on the paragraph on the first page?

How do you think allowing foreign banks to reach individual customers in China is going to effect the economy? How might it impact, in general, the way business is done?

Is Citigroup acting too aggressively at trying to reach individual customers? Is this a good strategy? Will other banks follow or continue to do business through Chinese banks?

What do you think about Citigroup being called “Hua Qi”?

What do you think about China’s five year plan?

Does China seem to be as open as they say they are to letting foreign banking in? Are they delaying it to be as safe and conservative as possible? What are your thoughts on the three pages of requirements to be met before individual customers can be reached?

Submitted by Danny Allustiarti

3 comments November 20th, 2006

Biological Business in China

Article

Deep in the remote western mountains of the Xinjiang province in China, local botanists search for miracle drugs to share with the world. Drug companies such as Swiss drug giant Novartis AG are looking at China for new drugs from ancient Chinese remedies that exist in plants and fungi native to the country. Due to the increasing costs of developing new drugs, companies such as Novartis are optimistic that traditional Chinese medicinal cures will lead them in the battle to fight modern diseases

It is important to recognize there is a fundamental difference from the way China and the way the West discovers drugs. Over centuries, Chinese doctors have tweaked concoctions with variable amounts of different substances until they achieve their desired medicinal purpose. This was mainly completed by trial and error, so these eastern doctors are not certain which parts of the body the medicine is targeting. Alternatively, western doctors take the reverse approach by finding the targeted area of the body, and working backwards to find the correct chemical compound to cure the problematic area. This is why collaboration between the East and West will probably not occur.

Fortunately, drug companies such as Novartis and French Drug maker Servier are working together with the Shanghai Institute of Materia Medica (SIMM), to isolate the active compounds in Chinese traditional medicine by testing the raw extracts from plants collected by Chinese biologists. Over the past three decades SIMM has been hunting for the rare plants and herbs used in traditional Chinese medicine to treat ailments ranging from cancers to common aches and pains. The way Novartis sees it, ‘China has thousands of years’ experience of using plants in Chinese traditional medicines. The idea was, why not use the Chinese experience as a kind of filter.

Novartis has previously used traditional Chinese cure for fever to fight malaria with the plant with a native ‘sweetworm’ plant. The cure for this disease was found written on silk in a tomb which dates back during the West Han Dynasty which existed over 2200 years ago. In the 1970s scientists working for the Chinese military used this drug in Vietnam to combat malaria. Novartis later decided to make a deal with the Chinese to purchase rights to the sweetworm plant for several million dollars. Today, over 1,000 natural products have come to Novartis working with SIMM, resulting in cures for a number of diseases.   As the multi-billion dollar pharmaceutical industry progresses into the next generation it will become increasingly important for them to protect their future…and defend the world’s endangered environments.

Now you may be asking yourself…why should business’ worry about preserving the natural environment of China? There are several moral issues to this question.

First, If China continues to grow westward as it currently is, many of the drugs which organizations such as SIMM are searching for will become extinct before they are obtained. It is estimated that 15 to 20 percent of higher plant varieties in China are endangered (threatening the existence of 40,000 species of organisms related with them).

Continued westward expansion of Chinese industry could threaten these species which may hold the answers for solving the world’s most crippling diseases.

Second, by preserving their environment the Chinese government can ensure the next generation of Chinese will have enough to eat, clean water to drink, and healthier people. China already has the worst air quality in the world. Fortunately, China is now awakening to these rising environmental issues and is taking action by building reserves, botanic gardens, protecting endangered endemic species and by building genetic banks for rare plants. Additionally, with the Olympics coming in 2008 their government is attempting to give China more eco-friendly by erecting a ‘greenwall’ or ‘treebelt’ around Beijing to stop harmful dust and particles from reaching the city.

Lastly, helping out the environment is an important ethical issue. Many businesses operating today maximizing profit in the short-term by harming their environment and their people. Take for example the logging industry in China. With forests being cleared in China, not only is the world loosing reserves potentially for future miracle drugs, but these trees no longer exist to filter out CO2 and other pollutants in the air which filter out other diseases such as bird flu or SARS. Does this mean they should stop cutting down trees? Of course not. At the same time, businesses must be aware and responsible for the actions they make and the consequences which result.

With nearly 10 million kilometers of land, holding over 10 percent of the world’s plants and terrestrial vertebrate species, China’s rich biodiversity is faced with a critical situation. With international trade increasing in China at increasing rates, exotic pests and invasive plants are creating additional stress for the already endangered varieties of medicinal plants, fungi and herbs.  Who is responsible for saving the Chinese environment? While the government is playing an important role, I believe businesses need to play a stronger role in protecting these future resources.  Imagine the economic difference between finding a fungus in the Chinese forest which holds a cure for Alzheimer’s vs. clear cutting a few acres of the same forest to sell as lumber. The answer should be obvious…

Submitted by Steve Rodger

8 comments November 20th, 2006


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The posts, comments and/or views expressed on this trip blog, whether by a Cal Poly student or faculty or an outside guest to the blog, do not necessarily reflect the policies or views of Cal Poly, the Orfalea College of Business (OCOB), any of the OCOB's graduate programs and/or other students who participate in the trip.