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China to inject 40 billion dollars into debt-laden Agricultural Bank
2007-08-06
China is set to spend 40 billion dollars to bail out debt-laden Agricultural Bank of China, the weakest of the country's big four commercial banks, state press reported Monday. The funding will come from China's new forex investment agency, which will manage part of the country's foreign exchange reserves of more than 1.33 trillion dollars, the Economic Observer reported, citing unnamed sources. China's finance ministry was authorised early this year to issue 1.55 trillion yuan (204 billion dollars) in bonds to fund the establishment of the agency, with the proceeds to buy forex reserves from the central bank. Agricultural Bank is the last one of the big four state lenders to undergo a government-aided financial overhaul with the aim of eventually listing on the stock market. State media has reported the troubled lender hopes to finish its restructuring plan this year. The forex agency, which is expected to be set up in September, would use 65 billion dollars to take over the central bank's investment arm, Central Huijin Investment Corp, according to the Economic Observer. Central Huijin would then inject 40 billion dollars into the Agricultural Bank, the paper said. China has injected a total of 60 billion dollars into the other three major banks -- Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank -- to bail them out. Agricultural Banks' non-performing loan ratio stood at 23.44 percent at end-2006, a notch lower than the figure of 26.17 percent recorded in 2005, according to the latest figures. The non-performing loan ratio across China's banking sector was 8.98 percent in June and was expected to fall to around five percent in 2008, China Banking Regulatory Commission chief Liu Mingkang said last month.
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