China Considers Major Capital Injection into State Banks

HONG KONG (Reuters) – China is contemplating injecting up to 1 trillion yuan ($142.39 billion) into its largest state banks to bolster their ability to support the struggling economy, as reported by Bloomberg News on Wednesday.

This initiative is part of a broader stimulus package that Beijing announced this week aimed at rejuvenating China’s ailing economy and sluggish markets.

The funding is expected to primarily come from the issuance of new special sovereign bonds, according to Bloomberg’s sources.

The National Financial Regulatory Administration (NFRA), which oversees the country’s banking sector, did not provide immediate comment to a Reuters inquiry.

China’s largest lenders are grappling with shrinking margins, faltering profits, and increasing bad loans due to economic slowdown and an unprecedented crisis in the property sector.

Four out of the five largest lenders in China reported lower profits in the second quarter after complying with government urges to lower lending rates to stimulate weak demand.

If this massive capital injection proceeds, it will mark the first significant intervention by the Chinese government to replenish its major lenders since the 2008 global financial crisis, as cited in the Bloomberg report.

In the market, China’s CSI300 blue-chip index reversed early losses to trade 0.35% higher, and Hong Kong’s Hang Seng Index rose 1.5%. The yuan continued to gain strength, last up 0.12% at 7.0241 in the onshore market.

Note: ($1 = 7.0232 Chinese yuan renminbi)