China injects about $54 billion into state banks and insurers
China plans to recapitalize eight major state-owned financial institutions totaling 360 billion yuan, or approximately $53.6 billion. The funds will go to the country's largest state-owned banks, insurance companies, and policy financial institutions.
The plans were announced by China's Ministry of Finance and the financial institutions themselves. A significant portion of the funding will come from the issuance of special government bonds.
The Ministry of Finance of the PRC plans to issue special government bonds of 300 billion yuan in the near future. The funds will be used to replenish the core capital of eight central state-owned financial companies.
Who will receive the money
The largest financing is earmarked for two big state-owned banks. Agricultural Bank of China plans to raise up to 160 billion yuan, and Industrial and Commercial Bank of China (ICBC) up to 100 billion yuan through share placements to designated state-owned investors.
Among the buyers of the shares will be China's Ministry of Finance, state-owned China National Tobacco Corporation, and its affiliated companies.
Another 30 billion yuan will be contributed by the Ministry of Finance to the capital of Export-Import Bank of China, and 10 billion yuan will go to the state-owned export credit insurance agency China Export & Credit Insurance Corporation.
The package also covers four major insurance groups. People's Insurance Company of China plans to raise up to 15 billion yuan, China Life Insurance Group will get 35 billion yuan, China Taiping 7 billion yuan, and China Reinsurance 3 billion yuan.
All eight institutions will use the new capital primarily to strengthen core capital adequacy ratios and expand financing capabilities for the economy.
Beijing expands support program
The current package continues the large-scale recapitalization of China's financial sector. Last year, the Ministry of Finance already issued special bonds of 500 billion yuan to replenish capital of Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China.
This time, Beijing has expanded the list of recipients: in addition to large commercial banks, policy financial institutions and insurance companies will receive support.
The Ministry of Finance stated that the financial condition of the eight institutions remains stable, the quality of their assets is solid, and key regulatory indicators are within a safe range. The authorities call the recapitalization a preventive step to enhance the institutions' ability to withstand risks and finance the real sector.
Meanwhile, Chinese banks are operating amid weaker credit demand and declining interest rates, which pressure their profitability and interest margins. Additional capital allows them to increase lending without worsening capital adequacy ratios.
For insurance companies, the capital increase should expand their ability to underwrite risks and invest more long-term funds in equities, corporate capital, and other assets.
Based on materials from: Ministry of Finance of the PRC, Xinhua, BBC
