Highlights from the last week of China business news.
Trying to keep a lid on prices
The government has been stepping up efforts to keep inflation under control lately. Premier Wen Jiabao announced a freeze on energy prices, meaning no increase in the price of oil products, natural gas and electricity. Then the NDRC said large food producers would have to get government approval if they wanted to raise prices. The central bank joined in by announcing its first reserve requirement ratio hike of 2008 – the 11th since the start of 2007 – bringing the rate to 15%. As Spring Festival (and its attendant price-gouging) approaches, the cabinet also toughened regulations on price manipulation, raising the maximum fine to US$137,000. And with inflation hitting an 11-year high in November, the last thing the government would want is even higher prices over the festive season.
End of the road for SIA-Temasek?
The saga continues. Singapore Airlines (SIA) said it wouldn’t raise its offer for a stake in China Eastern Airlines, days after the Shanghai-based carrier’s minority shareholders voted to reject a buy-in by SIA and Temasek. Air China and its parent, China National Aviation Holding Corp (CNAHC), looked set to pounce on the opportunity to expand their own stake in China Eastern (see our piece in last week’s mailer for a recap). But a glimmer of hope remained for the Singaporeans. China Eastern said it couldn’t consider any bid from CNAHC because of a technicality: a lockup clause embedded in the terms of the SIA deal that would run for the next eight months. Then that glimmer was extinguished when China Eastern said it would consider “any sincere bid” from CNAHC. Cathay Pacific Airways, which owns a bit of Air China and vice versa, said it will support Air China if it makes a bid for China Eastern. The momentum for a CNAHC deal is building.
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