CITIC (Part 1): Introducing The CITIC Conglomerate

In this article, we introduce the CITIC Group conglomerate (中信集团)(HKEX: 0267). Though most commonly known for its financial services and investment banking arm, the CITIC conglomerate actually spans a very wide range of industries with diverse businesses ranging from commodity mining, heavy machinery manufacturing and energy to real estate development, construction, telecommunications and retail distribution.


A financial analysis and discussion of the Group's future will be in Part 2.

 

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Corporate History

What is now CITIC Group was founded in 1979 as the China International Trust Investment Corporation (CITIC) (中国国际信托投资公司) by Rong Yiren (荣毅仁), a key figure in China's opening up and economic reform history, during the country's early years of opening up. Rong Yiren proposed the concept of CITIC to Deng Xiaoping as a way to facilitate foreign investment in China and boost economic development.


CITIC was initially involved in miscellaneous deals across different industries, such as renting 200 taxis and a Boeing-747 from abroad to expedite China's modernization process. As the company grew, CITIC expanded its scope of business beyond facilitating foreign investments, beginning with the acquisition of Hong Kong based Ka Wah Bank (嘉华银行) (now CITIC Bank International) and the acquisition of a 10% stake in an Australian aluminum factory in 1986, and subsequently the founding of CITIC Securities (中信证券) in 1995 after China started piloting stock markets in Shanghai and Shenzhen.


In 2001, CITIC Group (中信集团) was officially founded to incorporate CITIC's various businesses, with the Group continuing to expand into different industries in China and abroad, including building the famous Bird's Nest (鸟巢) stadium for the 2008 Beijing Olympics and acquiring oil wells in Kazakhstan.


In 2011, CITIC Group was restructured with a subsidiary named CITIC Limited (中信股份) which held more than 90% of CITIC Group's assets.


In 2014, CITIC Pacific (中信泰富)(HKEX: 0267), a subsidiary of CITIC Group listed on the Hong Kong Stock Exchange which faced severe financial losses during the 2007-2008 financial crisis, acquired 100% of CITIC Limited from CITIC Group and was subsequently renamed CITIC Limited.


Note: this was presumably part of a shell company acquisition for CITIC to go public. We refer to CITIC Group and CITIC Limited interchangeably in this article, although the official name of the listed entity under discussion is CITIC Limited.


In subsequent years, CITIC continued its domestic and overseas expansion across various industry sectors, including infrastructure development projects as part of China's Belt and Road Initiative, construction and commercial real estate development, commodity and resource mining, telecommunications, auto dealerships, consumer retail distribution, and etc.


Conglomerate Overview

The CITIC conglomerate comprises of five main business segments:

  1. Comprehensive Financial Services

  2. Advanced Intelligent Manufacturing

  3. Advanced Materials

  4. New Consumption

  5. New-Type Urbanization


CITIC Conglomerate Overview
Source: CITIC Group

We walk through each segment in the sections below.


Comprehensive Financial Services

The Comprehensive Financial Services segment comprises of seven sub-segments:

  • CITIC Bank

  • CITIC Trust

  • CITIC-Prudential Life

  • CITIC Securities

  • China Securities

  • CITIC Finance

  • CITIC Consumer Finance


CITIC Bank (中信银行)(SHA: 601998)(HKEX: 0998)

CITIC Bank is China's tenth largest commercial bank in 2021, with total assets worth RMB8 trillion. Corporate banking contributed to 46% of 2021 operating income, followed by retail banking at 40.4%, interbank market-making activities and personal wealth management products at 13%, and other sources of income at 0.6%.


Ranking of Largest Chinese Banks By Total Assets
Ranking of Largest Chinese Banks By Total Assets (Data Source: China Banking Association/中国银行业协会)

CITIC Trust (中信信托)

CITIC Trust is a non-bank financial institution regulated by the China Banking and Insurance Regulatory Commission that is primarily engaged in the trust business in the Chinese sense of the word (信托). Specifically, in China, companies frequently set up special purpose entities (called "trusts") to raise funding for specific projects with a limited timespan (e.g. real estate and infrastructure development projects, capital expenditure investments, or company restructurings). Investors who invest in these trusts receive coupon payments throughout the duration of the project, and are returned their principal payments upon completion of the underlying project. CITIC Trust facilitates the structuring and marketing of trusts for client companies, with trust fees and commissions contributing to 67% of the institution's 2021 revenue. Clients are engaged in various industries including infrastructure, real estate, and the financial markets.


The remainder of CITIC Trust's revenues come from wealth management products and services for institutional and high net worth clients, including family trusts in the traditional sense of the word, insurance trusts, and investments in subsidiary companies such as CTI Capital (an overseas extension of CITIC Trust's trust business in the Chinese sense), CITIC Trust PE (a private equity and venture capital fund manager), and CITIC Prudential Fund (a joint venture engaged in the management of mutual funds and other assets).


CITIC-Prudential Life (中信保诚)

CITIC-Prudential Life is a 50-50 joint venture between CITIC and British insurer Prudential which offers life, health, and accident insurance and reinsurance services. In 2021, life insurance products contributed to 77% of premium income, with heath and accident insurance products accounting for the remaining 33%.


CITIC Securities (中信证券)(SHA: 600030)(HKEX: 6030)

CITIC Securities is one of China's leading securities companies and is engaged in investment banking, trading, asset and wealth management, and alternative investing. Notably, CITIC Securities is also the largest shareholder of China Asset Management Company (China AMC)(华夏基金), China's fourth largest fund manager by assets under management (AUM) in 2021.


Ranking of Largest Chinese Fund Managers By Assets Under Management
Ranking of Largest Chinese Fund Managers By AUM (Data Source: East Money Information/东方财富网)

Note: this ranking only considers entities that were set up specifically to focus on asset management, so asset management divisions of insurance companies and banks are omitted from the ranking.



In addition to the four main sub-segments above, CITIC's Comprehensive Financial Services segment also includes the conglomerate's 4.53% stake in China Securities (CSC Financial)(中信建设证券)(SHA: 601066)(HKEX: 6066), a mid-size investment bank and brokerage firm, CITIC Finance (中信财务), which functions as the conglomerate's treasury division, and CITIC Consumer Finance (中信消费金融), a financial institution set up by CITIC in 2019 to focus on consumer finance (similarly to Ant Financial, see here).


Advanced Intelligent Manufacturing

The Advanced Intelligent Manufacturing segment comprises of three key sub-segments:

  • CITIC Heavy Industries

  • CITIC Dicastal

  • CITIC Holdings


CITIC Heavy Industries (中信重工)(SHA: 601608)

CITIC Heavy Industries is one of China's largest heavy machinery manufacturers and offers products and services related to mining and heavy machinery, specialized robots and intelligent equipment (e.g. for national aerospace engineering projects), as well as new energy equipment (e.g. for offshore wind power projects and mould products for Tesla) and special materials.


CITIC Dicastal (中信戴卡)

CITIC Dicastal produces wheels and lightweight cast components for automobile powertrains, chassis, and body systems. The subsidiary is also the world's largest producer of aluminum automotive wheels, with an annual production capacity of 75 million wheels and 120,000 tons of castings produced in 26 major manufacturing facilities across China, the US, Europe, and Africa. Notable customers include Ford, General Motors, Chrysler, Mercedes-Benz Group, Volkswagen, Bosch, as well as giant state-owned Chinese auto manufacturers SAIC, FAW Group, and Dongfeng Motor.


CITIC Holdings (中信控股)

CITIC Holdings, also known as CITIC Investment Holdings, is a holding company with investments focusing on smart manufacturing and the application of digital technology to advance existing industrial manufacturing processes.


Advanced Materials

The Advanced Materials segment comprises of five key sub-segments:

  • CITIC Pacific Special Steel

  • CITIC Metal Group

  • CITIC Resources

  • CITIC Mining International

  • CITIC Pacific Energy Investment


CITIC Pacific Special Steel (中信泰富特钢)(SZEX: 000708)

CITIC Pacific Special Steel is China's largest manufacturer of special steel which produces bars, plates, seamless steel tubes, forged steel, wires and billets for customers predominantly in the auto components, energy, and machinery manufacturing industries, but also in other sectors including oil and petrochemical, transportation, and shipbuilding. The subsidiary produces over 16 million tons of special steel annually, with domestic sales in China and exports to over 60 other countries including the US, Japan, Europe, and Southeast Asia. CITIC Pacific Special Steel is the global leader in bearing steel (a special steel type that features high wear resistance and rolling fatigue strength) sales as measured by sales volume.


CITIC Metal Group (中信金属)

CITIC Metal Group is primarily engaged in commodities trading and mining investments, with a particular focus on niobium products, iron ore, and non-ferrous metals such as copper, steel, and aluminum. The subsidiary's business portfolio spans across China, Canada, Peru, Brazil, and Australia, while an application to go public has already been received by the China Securities Regulatory Commission.


CITIC Resources (中信资源)(HKEX: 1205)

CITIC Resources is predominantly engaged in the exploration, development, and production of oil, with additional businesses including investments in coal mining and commodity (e.g. aluminum, coal, and steel) imports and exports.


CITIC Mining International (中信矿业国际)

CITIC Mining International operates the Sino Iron magnetite mining project through its Australian subsidiary, CITIC Pacific Mining (中信太平洋矿业). The Sino Iron project is the largest magnetite concentrate mining operation in Australia, and is also a major supplier of premium feedstock to Chinese steel mills with over 21 million wet tons of concentrate shipments produced in 2021. Nevertheless, CITIC Pacific Mining is facing ongoing litigation with the mining tenement holder, and significant legal risks remain with regards to Sino Iron's potential continued operations going forward.


CITIC Pacific Energy Investment (中信泰富能源)

CITIC Pacific Energy Investment invests in and manages power plants across China, including traditional large scale coal power plants as well as renewable power generation projects.


New Consumption

The New Consumption segment comprises of five key sub-segments:

  • CITIC Telecom International

  • AsiaSat

  • CITIC Press

  • Dah Chong Hong

  • CITIC Agriculture


CITIC Telecom International (中信国际电讯)(HKEX: 1883)

CITIC Telecom International is a telecommunications company based in Hong Kong with subsidiary operations in Macau and Southeast Asia. The company's scope of business includes traditional voice, messaging and mobile data, fixed line broadband internet services, enterprise IT services, and the operation of data and cloud computing centres.


AsiaSat (亚洲卫星)

AsiaSat, full name Asia Satellite Telecommunications Holdings, is a jointly-owned enterprise by CITIC and American private equity firm The Carlyle Group that is engaged in the leasing and sales of satellite transponder capacity for the provision of broadcasting, communications, and signal uplinking and downlinking services. AsiaSat provides services for international broadcasters and content providers delivering over 550 program channels in 35 different languages, reaching more than 850 million TV households in Asia Pacific.


CITIC Press (中信出版社)(SZEX: 300788)

CITIC Press is engaged in book and digital book publication, as well as bookstore retailing, in mainland China.


Dah Chong Hong (大昌行)

Dah Chong Hong (DCH) is an automotive and consumer products distributor active across 13 Asian markets. The company's largest segment is its automobile business, which operates dealerships for 20 leading brands including Bentley, Mercedes-Benz, Audi, Lexus, Toyota and Honda, in addition to leasing and motor financing services, aviation support services (e.g. ground support equipment and cargo handling), and the sale of luxury yachts.


Some of DCH's Auto Brands in Mainland China
Some of DCH's Auto Brands in Mainland China (Source: Dah Chong Hong)

DCH's consumer products segment represents over 1,000 Chinese and international brands in the food, fast-moving consumer goods, healthcare, and electrical products categories, with operations across Greater China and Southeast Asia. Additionally, DCH has a logistics arm which includes distribution centres and an in-house fleet to serve customers in the Greater China area, as well as a supplementary healthcare segment which provides tailored supply chain solutions to healthcare companies. During the COVID-19 pandemic, DCH was the exclusive logistics provider for the Fosun-BioNTech COVID-19 vaccine in Hong Kong and Macau, distributed the Sinovac vaccine in Hong Kong, and supported the distribution of treatments for COVID-19 patients in Singapore.


CITIC Agriculture (中信农业)

CITIC Agriculture and its subsidiaries are dedicated to developing agricultural science and technology in line with the central government's national strategies and development plans.


New-Type Urbanization

The New-Type Urbanization segment comprises of eight key sub-segments:

  • CITIC Construction

  • CITIC Engineering

  • CITIC Environment

  • CITIC Industrial Investment

  • CITIC Offshore Helicopter

  • CITIC Pacific Properties

  • CITIC Urban Development And Operation

  • CITIC Heye Investment


CITIC Construction (中信建设)

CITIC Construction is a construction services provider that works on housing, infrastructure, and industrial facility projects in China and abroad. Project examples include the Beijing National Stadium (鸟巢), which served as the main venue for the 2008 Olympic Games, the JW Marriott Hot Spring Resort in South Korea's famous Chejudo island, various projects in countries that are part of the Belt and Road Initiative, the UK Asian Business Port project in London's Royal Albert Docks, as well as other projects throughout Asia, Europe, the Middle East, and Latin America.


CITIC Engineering (中信工程)

CITIC Engineering is an engineering and construction firm focusing on infrastructure, urbanization, and ecological projects that provides services throughout the entire project lifecycle, including planning, consultation, survey and design, investment and financing, engineering, procurement, and construction, and operation management services. The company predominantly operates in China, but also has overseas projects similarly to CITIC Construction.


CITIC Environment (中信环境)

CITIC Environment, full name CITIC Environment Investment Group, is engaged in water treatment, solid waste and hazardous waste processing and disposal, as well as energy saving services. Through the Group's subsidiaries, CITIC Environment operates more than 70 water plants and processes over 900,000 tons of hazardous waste each year, in addition to making plans to develop in the field of waste heat recycling and utilization.


CITIC Industrial Investment (中信兴业)

CITIC Industrial Investment is described as "a capital management company that aims to enhance the efficiency and return on investments of state-owned capital", with investments in various companies and businesses across different sectors in China.


CITIC Offshore Helicopter (中信海直)(SZEX: 000099)

CITIC OffShore Helicopter (COHC) operates a range of offshore and onshore services including offshore oil and wind power air services, air emergency rescue, aircraft maintenance, port navigation support, and drone operations. COHC has the largest civil helicopter fleet in Asia with 85 helicopters and is the only supplier of helicopter pilots to ports across China.


CITIC Pacific Properties (中信泰富地产)

CITIC Pacific Properties develops and manages premier properties focusing on mixed-use, commercial, and residential projects with operations spanning the entire commercial lifecycle, from investment and project development to marketing and property management. The company owns and manages properties in major cities in the Yangtze River Delta (e.g. Shanghai and cities in the surrounding Zhejiang and Jiangsu provinces), along the Yangtze River Economic Belt (e.g. Wuhan, Chengdu), the Greater Bay Area (e.g. Shenzhen, Hong Kong, Zhuhai) and the Bohai Rim Economic Circle (e.g. Beijing, Tianjin municipality, and Shandong province).


Example projects include the Lujiazhui Harbour City (陆家嘴滨江金融城) project in Shanghai (50% owned), a mixed-use project with high-end office buildings that have been sold to top financial and insurance firms in China (e.g. Agricultural Bank of China, ICBC, China Life) and Singapore's United Overseas Bank (UOB), as well as serviced apartments run by the Mandarin Oriental Hotel Group, Phase I of the Harbour City (广州海港城) project in Guangzhou, in addition to central business district developments in Wuhan, Suzhou, and Jinan cities, and various residential developments in Hong Kong.


Note: for further reference, see our guide on Chinese provinces here and Chinese cities here


CITIC Urban Development And Operation (中信城市开发运营)

CITIC Urban Development and Operation focuses on urban development and upgrading, with projects including the Fenghua Industrial Complex in Ningbo (中信宁波创新工业综合体), the Shantou Bay tunnel (汕头湾海底隧道) and other supporting public facilities (e.g. roads, schools, hospitals, convention centres, and museums) in cooperation with the Shantou Municipal Government as part of the development of the Shantou Special Economic Zone in Guangdong province.


CITIC Heye Investment (中信和业)

CITIC Heye Investment develops and manages commercial real estate projects (e.g. office buildings and hotels) across first and second tier cities in China, including the CITIC Tower in Beijing.


Note: see our Chinese city classifications guide here.

 

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