China to inject 500 billion yuan to four state-owned commercial banks

(ECNS) -- China's Ministry of Finance will inject 500 billion yuan (about $68.9 billion) into four large state-owned commercial banks — Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China, according to announcements released on Sunday.

The funds will be used to enhance the core Tier One capital.

This marks the official unveiling of the fund allocation plan for the issuance of 500 billion yuan in special treasury bonds aimed at strengthening the capital base of China's major state-owned commercial banks.

Guo Tianyong, director of the China Banking Research Center, stated that based on past experience, the newly injected funds will replenish capital for state-owned commercial banks. This, in turn, will help sustain the macroeconomic recovery and boost market confidence.

Today, China's major state-owned commercial banks, including the four that received capital injections, are operating with stable asset quality and sufficient provisions. Following international best practice standards, their key indicators are all within the healthy range.

For example, as of Dec. 31, 2024, the Bank of China reported a core Tier One capital adequacy ratio of 12.20 percent, a Tier One capital adequacy ratio of 14.38 percent, and a total capital adequacy ratio of 18.76 percent, all of which exceed regulatory requirements by 3.20, 4.38, and 6.76 percentage points, respectively.

Lian Ping, chief economist at Guangkai Chief Industry Research Institute, said that although state-owned banks have good capital adequacy ratios, they need to boost their credit capacity to support the real economy. In the next two years, sectors like manufacturing, innovation, and consumption will need significant credit support. As banks increase lending, their capital ratios may decrease, but the capital injection ensures banks can meet credit demand without being limited by these ratios.

The state-owned commercial banks that received capital injections will now find it easier to meet regulatory requirements.

For example, China Construction Bank stated that with the implementation of the measures for the capital management of commercial banks on Jan. 1, 2024, a differentiated capital regulatory system was established, setting higher standards for capital and risk management. The capital injection will help them more effectively meet the regulatory requirements and enhance their international competitiveness, according to the bank.

(By Gong Weiwei)