China is weighing on injecting approximately 1 trillion yuan (equivalent to $142.39 billion) of capital into its major state banks to enhance their ability to bolster the weakening economy, as per a report by Bloomberg News on Wednesday.
This initiative is part of a series of extensive stimulus actions that Beijing has launched this week to revitalize China’s ailing economy and sluggish markets. The majority of the funding is anticipated to be generated from the issuance of new special sovereign bonds, according to sources familiar with the situation cited by Bloomberg.
Leading financial institutions in the world’s second-largest economy have been grappling with diminishing margins, declining profits, and increasing non-performing loans amid decelerating growth and an unparalleled crisis in the property sector.
Following a government push to lower lending rates and stimulate feeble loan demand, four out of China’s five largest banks recorded reduced profits in the second quarter.
The proposed substantial capital injection, which is still subject to potential modifications, would mark the first instance since the 2008 global financial crisis that the Chinese government has intervened to reinforce its major lenders, as reported by Bloomberg.
Amidst these developments, China’s CSI300 blue-chip index overturned its initial losses to trade 0.35% higher, while Hong Kong’s Hang Seng Index surged by 1.5%. Furthermore, the yuan continued its upward trajectory, advancing by 0.12% to reach 7.0241 in the onshore market.
