China will issue special treasury bonds worth 300 billion yuan, or about $45 billion, to replenish the tier-one capital of eight state financial institutions. The funds will go to Industrial & Commercial Bank of China, Agricultural Bank of China, China Export-Import Bank, China Export & Credit Insurance Corp., People’s Insurance Company of China, China Life Insurance, China Taiping Insurance Group, and China Reinsurance Group.
The announcement followed Agricultural Bank's intention to raise up to 160 billion yuan, while ICBC plans to raise 100 billion yuan through an A-share placement. The government plans to subscribe to 130 billion yuan in AgBank's placement and 70 billion yuan in ICBC's placement. China National Tobacco will also be a major investor in both cases. The Ministry of Finance will fully subscribe to the People’s Insurance placement for 15 billion yuan and will also invest 30 billion yuan in China Eximbank, 35 billion yuan in China Life, 7 billion yuan in China Taiping, 3 billion yuan in China Reinsurance, and 10 billion yuan in China Export & Credit Insurance Corp.
The recapitalization comes amid record-low net interest margins for Chinese banks. The average capital adequacy ratio in the sector was 15.26% at the end of June, while the average tier-one capital ratio was 10.72%. This is part of a policy initiated in 2024: last year, four lenders received a total of $69 billion in capital through government bonds. The new inflows are expected to strengthen balances and expand lending capabilities for businesses and households, as well as support strategic sectors and infrastructure, even amid weak loan demand.
Market reaction was subdued: ICBC fell by 0.78%, Agricultural Bank lost 0.69% at the opening of trading in Hong Kong, while People’s Insurance quotes remained almost unchanged.