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Four of China’s biggest banks will raise a total of RMB 52 billion ($72 billion) through stock sales to investors, including the Treasury, as Beijing seeks to strengthen its vast banking sector against economic disasters.
China and China Construction Bank, the Bank of China, the telecommunications bank and the Postal Savings Bank, said they would raise RMB165BN, RMB120BN, RMB130BN and RMB105BN, respectively in their stock exchange filings on Sunday.
The Treasury will be the main investor in capital gains by the four banks. These were all state-run and had about RMB10TN in capital as of June last year.
Rare government-oriented injections are part of a series of formal support measures aimed at increasing banks’ core tier 1 capital (a measure of fairness used by regulators to limit leverage) and restoring confidence in the world’s second largest economy since last September.
China is working on the threat of deflation, weak consumer spending and slowing down real estate until its fourth year, with policymakers recently adopting a more urgent tone to try to restore trust.
The country’s biggest banks face margin pressures, and the capital increase, previously flagged by the authorities, is part of the push to boost lending amid the continued weakness of the entire economically important real estate sector.
Bank of China’s net profit margin – a measure of profitability – fell from 1.59% to 1.4% last year, but it’s slightly narrower in bank communications to 1.27%.
The authorities pledged this month to set the 2025 GDP growth target at 5% at a meeting of top policymakers and issue RMB500bn with special bonds to fund capital injections into the banking sector.
China’s exports are subject to fresh tariffs from the US Trump administration. This was initially another 10% in February, doubled to 20% this month. Last year’s exports were a driving force for growth as lower home prices became heavier on consumption.
“Injections increase the availability of funds to support the country’s growth amid tariff headwinds,” wrote an analyst at S&P Global this month. They added that “Megabanks will play an important role in supporting government social and economic initiatives through lending to areas that promote policy.”
Policymakers initially informed China’s biggest bank of capital when Beijing revealed mortgage fees and stock market buybacks last September. The stock market has since recovered after years of decline, with CSI 300 gauges in listed stocks of Shanghai and Shenzhen have risen by more than 10% over the past year.
However, the real estate sector remains a confident weight, with new home prices falling in February, bringing down 10% in development investments last year. According to a 2023 estimate from the National Bureau of Statistics, Chinese property developers total liabilities of around $1.2 billion.
