Citigroup Inc. became the first Western bank to issue credit cards in China without co-branding from a local financial institution as the government relaxes restrictions in the world's second-largest economy.

The cards will be denominated in yuan or dollars and accepted worldwide, Citi said today in an e-mailed statement. China UnionPay, the nation's largest electronic-payment network, will process payments within China, while MasterCard Inc. and Visa Inc. will handle cards internationally, the bank said.

Citigroup is expanding its ability to reach Chinese consumers with the cards, opening its 50th retail branch this month and confirming plans to double that within three years. Chief Executive Officer Vikram Pandit, grappling with a revenue slump in trading and investment banking, is seeking growth by pushing deeper into emerging markets.

"China's credit card market is far from saturated, it's just a matter of finding the right customer group and minimizing costs," said Tang Yayun, a Shanghai-based analyst at Northeast Securities Co. "Citigroup has its advantage in its IT system, product innovation and brand awareness, especially among high-end customers, while the disadvantage is its lack of distribution channels in China."

Foreign banks' branch networks are dwarfed by those of local lenders including Industrial & Commercial Bank of China Ltd., which has 16,227 outlets, according to its website. HSBC Holdings PLC has the biggest network of any overseas bank, with 130 locations, and Standard Chartered PLC has 90.

Because of interbank charges and restrictions on fees, issuers need at least 20 million cards to be profitable in China, according to a survey of executives and branch managers at 41 foreign banks published by PricewaterhouseCoopers LLP last month.

Citigroup's shares have risen 14% this year to $29.98, compared with a 13% gain in the Standard & Poor's 500 Index.

The bank this month started an investment banking joint venture with Orient Securities Co., gaining access to the world's second biggest market for share sales. The lender in March sold its entire stake in Shanghai Pudong Development Bank Co., nine years after the purchase, for an after-tax gain of about $349 million. It also owns 20% of China Guangfa Bank Co.

China will probably overtake the U.S. as the largest market for cards by 2020, with about 900 million, according to a MasterCard forecast from September 2010. Payment processors such as MasterCard and Visa won partial support last month from World Trade Organization judges in a claim that China unfairly restrains their operations.

China requires all yuan-denominated credit card transactions to go through China UnionPay, which was established by more than 80 banks and other state-owned companies. Citigroup won authorization to issue its credit cards in February.

Bank of East Asia Ltd., Hong Kong's third-largest lender, became the first non-mainland issuer of credit cards in 2008. Hong Kong is a special administrative region of China.

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