Highlights from the last week of China business news.
CITIC: moving on
CITIC Securities narrowly avoided a potentially disastrous relationship with (the new JPMorgan unit) Bear Stearns in what would have been a US$1 billion share swap. As Bear Stearns was forced to accept a US government bailout in the wake of the sub-prime mortgage meltdown, CITIC Group’s chairman Kong Dan was coy about the fate of the future tie-up, saying that it was not guaranteed, and that CITIC had yet to complete due diligence on Bear. JPMorgan Chase took over the beleagured Bear for a song, and CITIC, like a bridegroom discovering his bride’s criminal record, announced that it would abandon Bear. But CITIC is moving on. CITIC Securities said it still wants to invest in foreign banks, most likely through its Hong Kong unit. Meanwhile, CITIC Pacific set aside US$2.6 billion for capital spending this year, much of which will be spent on an iron ore project in Western Australia.
Not your average Zhou
Rumors of central bank governor Zhou Xiaochuan’s professional demise have been greatly exaggerated. Many believed that Zhou would be replaced during this year’s National People’s Congress (NPC). But China’s desire for stability and a seasoned hand at the helm won out and Zhou was reappointed to his post. He didn’t waste any time getting to business, either. During the NPC he announced that he saw "no need" to use the appreciation of the yuan to fight inflation, while hinting that further interest rate increases might be one of the weapons the PBOC uses fend off rising prices. Shortly after the NPC concluded, the PBOC announced that China would stop checking the sources of foreign exchange for Chinese outbound investments, a move likely to encourage capital outflows and curb excess liquidity. It also raised the reserve requirement ratio 50 basis points to a record 15.5%. The central bank added that it would consider ways to open its domestic financial markets to foreign investments, though no details were provided.
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