In the News: Hainan Free Trade Port; Credit Suisse JV; and US-China Flights

Dubbed "China's Hawaii," Hainan became one of China's first special economic zones in 1988. In 2018, the island was named a free-trade zone with an eye on eventually becoming a free-trade port with even more business-friendly policies. When that happens, Hainan will surpass Hong Kong and Singapore to become the biggest free-trade port in the region in both size and population. Lin Nianxiu, a deputy director of the National Development and Reform Commission, told the South China Morning Post that the government's plans for Hainan will not undermine Hong Kong's importance as a major trading port as the two places are focusing on different industries. At the recent annual meeting of China's National People's Congress (NPC), an NPC official announced that the legislature will work on a Hainan Free Trade Port Law over the next year. 

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Credit Suisse takes majority control of securities JV

Credit Suisse has taken control of its securities joint-venture (JV) in China after raising its stake from 33.3% to 51%. The Swiss bank announced on June 1 that it is now the majority shareholder of Credit Suisse Founder Securities Limited (CSFS), its securities JV with local conglomerate Founder Group. The China Securities Regulatory Commission approved the move in April.

Headquartered in Beijing, CSFS was founded in 2008 and provides various capital markets services to domestic clients including sponsoring and underwriting A-shares and government and corporate bonds. Since October 2016, CSFS has also operated a securities brokerage business in Shenzhen. Credit Suisse also has an asset management JV in China, the ICBC Credit Suisse Asset Management Co. Ltd.

The U.S. has long called on China to relax foreign shareholding caps in its financial sectors, including securities, insurance and asset management, which limit the ability of foreign players to expand their presence in the Chinese market. There has been significant reform in the last two years, with Swiss investment bank UBS becoming the first international bank to gain approval to be the majority controller of its securities JV in 2018. Since then, other major international banks including Nomura, JPMorgan and Goldman Sachs have been approved to raise their stakes in their respective securities JVs.

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China to allow U.S. airlines to resume limited services

China will allow U.S. and other foreign airlines to increase their services in China. The announcement came soon after the U.S. Department of Transportation announced a ban on all commercial passenger flights by Chinese airlines starting on June 16. Following China's decision, the Trump administration walked back the ban to allow Chinese carriers to make two flights each week to and from the U.S.

The Civil Aviation Administration of China (CAAC) said 95 foreign airlines will be allowed to operate one flight once a week starting June 8. Previously, only 28 foreign airlines were doing so, none of them U.S. airlines. In May, the U.S. transportation department requested the CAAC permit American airlines resume flights to China after they halted their flights to China in February due to the coronavirus pandemic. However, the CAAC rejected the request at the time.

In May, the CAAC said that it would not relax its policy of allowing one international flight per airline per week until October at the earliest. Since March, China has barred virtually all foreigners from entering the country, including those with valid work and residence visas. In recent weeks, China has allowed certain categories of travelers to enter such as foreign business executives. In May, China established a "green channel" for essential business travelers from South Korea to have expedited health screening and quarantine procedures. On June 8, another expedited arrangement between Singapore and China began operations, essential business travelers from both countries will be exempted from mandatory quarantine requirements in each country, the Singapore Government said on Wednesday.

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