This week Singapore Airlines (SIA) bought a ~16% stake in China Eastern, a domestic Chinese airline, which is in the worst financial condition of the big three Chinese carriers. This by itself is groundbreaking news as it’s the first foreign investment in a domestic Chinese airline, but when you consider the recent takeover bid for Qantas in Australia and indeed SIA’s own failed bid for takeoff slots in Australia, it becomes even more interesting as a comparison of markets and their openness to change.
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.
The People’s Bank of China (PBOC) has hiked the reserve requirement by 50bps, to 12%, effective from August 15. The reserve requirement rate is now approaching the threshold of 13%, common back in 1988-98. This is the fifth time that the PBOC has tightened the reserve requirement policy this year, the last being a hike on July 20th.