China is considering injecting up to 1 trillion yuan ($142.39 billion) into its largest state-owned banks in an effort to enhance their capacity to support the country’s faltering economy, Bloomberg News reported on Wednesday.
This potential capital infusion is part of a broader set of stimulus measures unveiled by Beijing earlier this week, aimed at revitalizing China’s sluggish economic growth and financial markets.
According to sources cited by Bloomberg, the funds would largely be raised through the issuance of new special sovereign bonds.
China’s banking regulator, the National Financial Regulatory Administration (NFRA), did not immediately respond to a request for comment from Reuters.
The move comes as China’s major banks, crucial players in the world’s second-largest economy, face challenges including narrowing profit margins, rising bad loans, and the effects of a slowing economy combined with a deepening property sector crisis. Four of the country’s five largest banks reported lower second-quarter earnings, having lowered lending rates at the government’s urging to stimulate weak loan demand.
If confirmed, this would mark China’s first significant capital injection into its top lenders since the 2008 global financial crisis, according to Bloomberg.
In response to the news, China’s CSI300 blue-chip index (.CSI300) reversed earlier losses to trade 0.35% higher, while Hong Kong’s Hang Seng Index (.HIS) saw a 1.5% gain. The yuan also strengthened, rising 0.12% to 7.0241 in the onshore market (CNY=CFXS).