Citigroup (NYSE:C) has begun a major downsizing of its tech operations in mainland China, laying off around 3,500 staff across its IT centers in Shanghai and Dalian. These facilities previously supported Citi's global operations across more than 20 countries, but a growing push for cost-cutting and proximity to core business functions has led to a redistribution of roles. The move aligns with Citi's broader global restructuring effort under CEO Jane Fraser, aimed at streamlining the firm's workforce, real estate footprint, and reporting lines. The bank stated that the transition could be complete by early Q4, with no expected disruption to local banking services or remaining tech staff in Guangzhou.

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This round of layoffs marks one of the largest reductions among foreign banks operating in China in recent years and mirrors similar moves by other multinationals. Fidelity International eliminated 500 tech positions in Dalian last year, while IBM reduced over 1,000 roles in China in the summer. Western banks overall slashed their headcount in Chinese subsidiaries by 13% in 2023, according to FT analysis. Citi offered severance packages reportedly ranging from one month of pay per year of service to up to six months of bonus pay for those who accepted early agreements. Insiders noted the affected division had gradually shifted away from supporting China-specific functions in recent years, focusing instead on Europe, the Americas, and other parts of Asia.

While the cuts are significant, Citi emphasized it is still pursuing a long-term presence in China, including plans to establish a wholly owned securities and futures company. The timing of these layoffs, however, reflects growing operational caution among foreign financial institutions navigating China's slower economic momentum and complex regulatory landscape. Investors may view this as part of a larger trend of global banks recalibrating their offshore cost centers and shifting toward operational models that favor resilience, localization, and strategic efficiency.

This article first appeared on GuruFocus.