China will inject $54 billion into its financial sector, with insurers and state banks set to receive fresh capital from the finance ministry and other state institutions. The move aims to shore up lenders and insurers as the world's second-largest economy struggles to escape sluggish growth.
Beijing is directing billions of yuan into its banks and insurers as the world's second largest economy struggles to escape weak growth. A host of financial institutions said they would receive capital from state institutions, including the ministry of finance and the company that runs the country's tobacco monopoly.
Insurers get fresh capital
China Life Insurance, the country's largest life insurer, will receive 35 billion yuan, while the China Taiping Insurance Group said it would get 7 billion yuan. The People's Insurance Company 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 proceeds used to replenish its capital.
The initiative could help state insurers that Beijing has directed to support the stock market with medium- and long-term funds, while positioning them to help regulators manage smaller, higher-risk insurance companies. The insurance sector has struggled with eroding profitability because of persistently low interest rates, and numerous small and mid-sized insurers have reported deteriorating solvency ratios.
According to the Guardian: China Life said "The injection is an important step by the country to enhance the financial sector's ability", adding that it would strengthen the group's ability to withstand risk.
State banks add hundreds of billions in yuan
Three state lenders on Sunday also announced they will receive a combined 290 billion yuan in capital injections. The plan was first announced at an annual parliamentary meeting in March this year, extending a financing tool that had helped bolster some other big state banks last year.
The Agricultural Bank of China and the 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. The two lenders said the proceeds would be used entirely to replenish cash reserves, helping them sustain credit expansion as Beijing leans on state banks to support growth despite weak demand for loans.
Source: The Guardian
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