China, well known for its capital controls made some steps towards loosening those controls for individual investors last month with the announcement that individual mainland Chinese investors would be able to invest in the HK stock market.  However, now it appears the implementation will be another few days or weeks off according to an announcement by the Bank of China (BOC).

A few days ago, the Beijing Municipal government (separate from the national government) issued a report promoting the capital city as a new back office operations centre for the financial sector. Using a raft of incentives such as discounts on registration payments, and subsidized housing and land, Beijing is looking to attract all types of back functions to four new specially designated zones in the capital. Apparently Goldman Sachs / Gao Hua Securities, “Swiss Bank” (?) and Deutsche Bank have been in discussions about shifting some of their back office work there; the People's Bank of China, Agricultural Bank of China and the R&D arm of China Life Insurance Company have already signed contracts to relocate to the financial zone.

Reading Bank of China’s ticker last week was a crash course in China’s stock markets.  Towards the end of last week, the bank reported on its sub-prime exposure.  On the next trading day, if you were given the two ticker symbols for Bank of China (BOC) and their positions, you’d be hard pressed to guess what BOC’s actual position was.  In HK, BOC fell by as much as 5.4% over the course of the trading day*, while in Shanghai, the stock actually rose 1% on a day when the entire market rose 5% overall.  What happened?

Earlier this week we looked at how the Shanghai market has remained relatively unscathed by the sub-prime meltdown, but what about individual banks' exposure?