State banks of China are raising massive funds up upto Rs 520 billion yuan to boost the financial strength of the country. The Chinese government wants to have strong financial stability to support their economic growth. To support the plan to raise money, Beijing announced to issue 500 billion yuan in special sovereign bonds. The government plans to raise 500 billion yuan by selling these bonds to the investors and will give back the money to the banks. This will help the banks to improve their financial strength by lending more money to businesses and individuals, ultimately supporting the China economy.
The four largest state banks of China involved in this plan are:
Banks of Communications– This bank plans to raise upto 120 billion yuan.
Bank of China– This bank plans to raise upto 165 billion yuan.
Postal Savings Bank of China– This bank plans to raise upto 130 billion yuan.
China Construction Bank– This bank plans to raise upto 105 billion yuan.
The banks are planning to raise this money by selling A shares (a type of share) to investors and the Ministry of Finance in a private placement. The government plans to sell the shares at 8% to 21.5% higher price than their last closing price in Shanghai.
For example, – If the last closing price of the share was 100 yuan, then the selling price will be 8% higher ,means the share would be sold for108.8 yuan. If sold at 21.5% higher, the share selling price would be 121.5 yuan.
Though the state banks of China have strong capital, they have been facing slowing growth, rising bad debts and low profit- margins. So the plan is all about to strengthen China’s Bank and it will help them to achieve their target of 5% economic growth this year. It will also help China to manage risks like tariff tensions with the US.
