I assume you didn't go to Beijing to invest in the banks, Mq.
China looks to foreign investors as part of bailout plan for state banks
The government will transform some of the state banks into public shareholding companies, paving the way for the introduction of outside investors, Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), told Wednesday's edition of the China Daily.
The report follows an announcement by the State Council Tuesday that it had injected 45 billion dollars from the foreign reserves into the Bank of China and the China Construction Bank to bolster their balance sheets.
The bailout is only the first step in a government strategy that could see it pour as much as 100 billion dollars into the banking system as part of efforts to make banks solvent in preparation for a stockmarket listing, the Financial Times reported, quoting unnamed government officials.
The amount and timing of additonal injections have yet to be decided.
"The proposal was for more than 100 billion dollars to be earmarked for recapitalisation," a senior financial official told the Financial Times.
Analysts have long speculated that Beijing will be forced to inject public funds to rescue the debt-ridden sector that for years handed out easy loans to China's money-losing state enterprises.
The FT said that the Industrial and Commercial Bank of China will be the next to receive a tranche of the country's 400 billion dollars in foreign exchange reserves.
Officials hope the cash injection will not only make the banks more attractive to foreign investors but also help reduce bad loan ratios to around 10 percent, a level that would at least allow a listing on the domestic or Hong Kong markets.
Once the four banks, including the Agricultural Bank of China, have the "right conditions" in place for restructuring or issuing shares, the government will "especially usher in foreign companies as strategic investors", Liu said.
Foreign investment in them will improve the banks' corporate governance, drive forward internal control reforms, improve their financial performance and strengthen their international competitiveness, he said.
The CBRC has set a target of reducing the banks non-performing loan (NPL) ratio to 15 percent by 2005 from current official levels of around 23 percent.
Regulators, however, are looking to accelerate reforms, namely tackling the NPL overhang, which economists estimate actually run at 40 to 45 percent at the four main banks, as the sector prepares to fully open up to foreign competition by end-2006 under promises made when China joined the World Trade Organisation.
Separately, Standard and Poor's Rating Service upgraded the outlooks on the 'BB+' long-term foreign currency counterparty credit ratings of Bank of China and China Construction Bank to positive from stable.
The fund injection, it said, could accelerate the two state banks' reform and help resolve problem loans but stressed further action was required to "underpin the longer-term solvency of the banking sector".
It estimated NPLs account for about 45 percent of all loan assets in China's banking system.
For its part, the Bank of China aims to reduce its NPL ratio to below 10 percent ahead of its planned domestic listing sometime in 2005, while the China Construction Bank is similarly trying to trim its bad debt burden.
The Industrial and Commercial Bank of China and the Agricultural Bank of China are further away from gaining a listing but they are also expected to receive a similar helping hand, analysts said.
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