China to pump $54 billion into state banks, insurers in capital-boosting push
Separately People's Insurance Company (Group) of China said it planned to raise up to 15 billion yuan through a private placement of A-shares to the Ministry of Finance, with the proceeds to be used to replenish its capital.
Highlights:
- Finance ministry to inject 300 bln yuan into state insurers and banks
- China Life, Taiping, PICC, Sinosure, China Reinsurance look to shore up capital
- ABC, ICBC, Exim Bank to receive 290 bln yuan
- Injections to bolster capital across financial system
China's finance ministry will lead a combined $54 billion capital injections into state-owned insurers and banks, the companies said today (6 September), in a coordinated push by Beijing to shore up capital across its financial system.
China Life Insurance (Group) Co, the country's largest life insurer, will receive 35 billion yuan ($5.2 billion), while China Taiping Insurance Group will get 7 billion yuan, the two groups said in statements.
Keep updated, follow The Business Standard's Google news channel
Separately People's Insurance Company (Group) of China said it planned to raise up to 15 billion yuan through a private placement of A-shares to the Ministry of Finance, with the proceeds to be used to replenish its capital.
The initiative could help bolster state insurers that were directed to support the stock market with medium- and long-term funds, while positioning them to help regulators manage smaller, higher-risk insurance companies.
Financial sector stability
The insurance sector has been grappling with eroding profitability due to persistently low interest rates, with numerous small and mid-sized insurers reporting deteriorating solvency ratios.
China Export and Credit Insurance Corp also said the finance ministry will inject 10 billion yuan to boost its core capital, and China Reinsurance (Group) said it will raise 3 billion yuan.
"The injection is an important step by the country to enhance the financial sector's ability to serve the real economy and promote the high-quality development of the financial and insurance industries," China Life said in its statement, adding that it would strengthen the group's ability to withstand risks.
Taiping said the funds would bolster its solvency and other key indicators.
Banks tap recapitalisation plan
Separately, three state lenders on Sunday also announced they will receive a combined 290 billion yuan in capital injections.
The plan was first unveiled at an annual parliamentary meeting in March this year, extending a financing tool that had helped bolster some other big state banks last year.
Agricultural Bank of China and Industrial and Commercial Bank of China, two of the country's largest state banks, said they planned to raise up to 160 billion yuan and 100 billion yuan respectively through private A-share placements to the finance ministry, China National Tobacco Corp and its subsidiaries.
Both lenders said the proceeds would be used entirely to replenish core Tier 1 capital, in a move to help sustain credit expansion as Beijing leans on state banks to support growth.
Weak loan demand remains a persistent drag on the world's second-largest economy, which also has been eroding profitability of the banking sector.
The Export-Import Bank of China, one of the country's three policy lenders, said the finance ministry will inject 30 billion yuan into the bank, effectively enhancing its capital base.
