China is to issue almost 40 billion euros in special debt securities to strengthen the capital ratios of state-owned enterprises. The issuance will be 300 billion yuan, equivalent to 38.5 billion euros, destined for eight public financial sector companies, including major banks such as the Industrial and Commercial Bank of China, the Agricultural Bank of China and the Bank of China, as well as insurers such as the China People's Insurance Company, Life Insurance and China Re Group.
The Chinese Ministry of Finance stated that all these companies are financially sound, with quality assets and balance sheets, and that their indicators are being closely monitored. The measure comes because the erosion of Chinese commercial banks' margins has limited companies' capacity to replenish capital.
Since 2024, the Chinese central government has sought to strengthen the capital base of its public enterprises, in a context of low interest rates that has reduced banks' capacity to replenish capital through dividends. Last year, the Bank of China and the Postal Savings Bank of China jointly received approximately 8.9 billion euros in similar support.
With this issuance, Beijing seeks to stimulate the financial sector and credit at a time when low demand has limited economic growth. Chinese authorities are also seeking to limit the risks associated with the real estate crisis the country has been experiencing for several years, thereby seeking to support growth.
