Four of China’s largest state-owned banks have announced plans to raise up to 520 billion yuan ($72 billion) through share sales, with the country’s Finance Ministry serving as the primary investor.
The move is part of a broader effort by Beijing to bolster the banking sector, strengthen lending capacity, and support economic growth amid ongoing financial pressures.
The banks involved in the capital raise are:
Bank of China – up to 165 billion yuan
China Construction Bank – up to 105 billion yuan
Bank of Communications – up to 120 billion yuan
Postal Savings Bank of China – up to 130 billion yuan
According to filings released on Sunday, the Finance Ministry will subscribe to 500 billion yuan worth of shares, making it the largest investor in these private placements. Following the capital raise, the ministry is expected to become the controlling shareholder of Bank of Communications.
This fundraising initiative follows Beijing’s pledge to issue 500 billion yuan in special Treasury bonds to recapitalize the country’s largest banks. The effort aims to replenish the banks’ core Tier-1 capital, a key measure of financial strength, allowing them to increase lending to businesses and consumers.
While China’s top banks currently meet capital requirements, they face profitability challenges due to a prolonged property slump, slowing economic growth, and rising levels of bad debt. The net interest margin—a key gauge of bank profitability—fell to a record low of 1.52% in the final quarter of 2024. Further interest rate cuts, expected later this year, could place additional pressure on earnings.
The Chinese government has set an economic growth target of around 5% for 2025, unchanged from the previous year. Policymakers have introduced several stimulus measures, including mortgage rate cuts and financial support for key industries, in an effort to boost domestic demand.
Economists suggest that strengthening bank capital reserves will help financial institutions provide more credit to the real economy, including sectors such as technology, consumer goods, and property. However, some analysts caution that while increasing lending capacity is important, restoring consumer and business confidence remains a significant challenge.
With input from Bloomberg, CNN, and the Wall Street Journal.
