PICK OF THE BUNCH: Tea farmers pick up spring tea at a production base in Yibin, southwest China's Sichuan Province (ZHUANG GEER)

O2O Competition

Tencent, one of China's biggest Internet companies, announced on February 19 that it will purchase a 20-percent stake in restaurant ratings and group-buying website Dianping for $400 million.

Competition has escalated among BAT, the acronym for China's three Internet giants (the other two being the leading search engine Baidu and e-commerce group Alibaba) as they seek growth through the expansion of O2O (online to offline) services.

On February 10, Alibaba offered $1.1 billion to acquire AutoNavi Holdings Ltd., making the Chinese digital mapping and navigation firm its wholly owned subsidiary. Given Alibaba's previous deals with group-buying website Meituan.com and taxi-calling app Kuaidi, analysts predict strong O2O performance from the company.

Baidu is expected to fare well too in the O2O sphere thanks to its alliance with Meituan's rival Nuomi.com and online app store 91 Wireless.

The deal between Tencent and Dianping is believed to benefit both companies as the former can reap more revenues from bricks and mortar stores while the latter will gain a wider public exposure due to Tencent's large user base, especially in its instant message app WeChat.

Monetary Tightening

The People's Bank of China (PBC), China's central bank, launched a 14-day forward repurchase operation (repo) at a bid rate of 3.8 percent on February 18, a move which will siphon 48 billion yuan ($7.9 billion) from the money market.

It marked the first time in eight months that the Chinese central bank has issued forward repurchase agreements. A repo is a central bank operation to withdraw funds from the interbank market to prevent excessive liquidity.

Since June of 2013, the PBC has conducted reverse repos in its regular open market operations to inject liquidity to the money market.

Economist Lu Zhengwei of the Industrial Bank said the central bank's move fell within market expectations.

"It has been a routine post-holiday operation for years following the Chinese New Year," he said.

Plenty of cash has flowed back into the interbank market from individuals following the week-long Chinese New Year, and there was a notable increase of the funds outstanding for foreign exchange as China's exports surged in January, he said.

The overnight and 7-day Shanghai Interbank Offered Rate (Shibor), a gauge of interbank lending rates, had fallen within a reasonable range, Lu said.

"The operation points to potential excessive liquidity in the interbank market, which doesn't entail any sudden change of the policy bias (by the PBC)," he added.