TO THE POINT: In line with the Central Government's decision to carry out tightened monetary policy, China's central bank launched two special depo-sits, encouraging banks to deposit more money into the central bank in order to curb liquidity. China's state-owned investment firm is buying into Morgan Stanley's shares to divert the country's ballooning foreign reserves. Allowing foreign-invested companies to be listed in the mainland stock market could work as another measure to absorb the excessive money in circulation. Shanghai has established a financial arbitration court to resolve disputes arising from the booming financial market.

By LIU YUNYUN

Numbers of the Week 7th and 29th The U.S.-based Petroleum Intelligence Weekly listed the top 50 global oil companies and China National Petroleum Corp. ranked 7th in the list, the highest ranking for Chinese petroleum companies. Sinopec Corp. ranked 29th.

A Done Deal?

China Eastern Airlines is entering into a strategic partnership with two Singapore companies in a bid to boost its performance and expand market share.

The prenuptial agreement stated that Singapore Airlines and Temasek-the investment body of the Singaporean Government-will purchase a combined 24-percent stake of China Eastern's shares at the cost of HK$3.8 per share.

Both governments have approved the deal, but the final decision still awaits the vote of stockholders. If two thirds of the shareholders agree, the deal will be closed.

"I am confident the deal will be approved at the shareholders' meeting on January 8," said Li Fenghua, President of China Eastern.

If the deal succeeds, China Eastern will surpass China Southern Airlines as the second largest airline on the mainland. Li hopes to increase the market share in Shanghai from the current 36 percent to 50 percent after the deal is inked.

However, Air China, the largest mainland airline and the biggest stockholder of China Eastern's tradable shares, disagreed and complained the acquisition price was "too low."

Fan Cheng, Air China's Vice President, pointed out that Singapore Airlines once invested in many airlines like Air New Zealand and Virgin Atlantic, but all ended in failure. Fan said these failures indicate the enormous difficulties confronting international cooperation in airline operation. "It is hard to say whether China Eastern can truly learn advanced management experience from Singapore Airlines," Fan said, adding that Singapore Airlines mostly focuses on the North American and European markets, while China Eastern serves mainly the Asia-Pacific region. "There is hardly any experience to share," Fan argued.

Li Fenghua contended that the cooperation with Singapore Airlines "is a government decision," and that he was sure "stockholders will vote for the cooperation."

Sparing No Effort to Curb Liquidity

One week after it announced it would raise the reserve requirement ratio by another 1 percentage point to 14.5 percent, the Chinese central bank said it would start taking special deposits as of December 27.

The move was the second time in the fourth quarter that the central bank has decided to issue special deposits, a measure that had previously not been resorted to in the past two decades.

Under the special deposit agreement, financial institutions will deposit a certain amount of money with the central bank and they will receive interest payments on the deposits after a certain period.

This time, there are two kinds of special deposits, including a three-month and a one-year special deposit with annual interest rates of 3.37 percent and 3.99 percent, respectively, said the central bank. The special deposits target rural credit cooperatives and city commercial banks excluding primary dealers in the open market. The special deposits adopt voluntary declaration of quotas.

Experts said the move shows the central bank's determination to curb the excessive liquidity in the financial markets. It is also a demonstration of "tightened monetary policy," which was stipulated at the Central Economic Work Conference held on December 3-5.

Serving Justice

Shanghai established a special financial arbitration court to handle the increasing number of financial disputes and also to relieve pressure on other courts.

Shanghai's Vice Mayor Feng Guoqin said that the establishment of the new court was to ensure the ability of the city's legal system to keep pace with the rapid development of the city as a leading financial center.

By the end of November, the aggregate trading volume (excluding foreign exchange trade) in Shanghai reached 114 trillion yuan ($15.41 trillion), a surge of 110 percent from a year earlier, according to Fang Xinghai, Director General of the Shanghai Municipal Government's Office for Financial Services. The figure far outpaced the amount estimated in the 11th Five-Year Plan for Shanghai published in 2006. The report had said that Shanghai's financial market trade value would reach 80 trillion yuan ($10.81 trillion) by the end of 2010.