Nation's capital into banks draws media attention worldwide

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Last updated at: (Beijing Time) Friday, January 09, 2004

Nation's capital into banks draws media attention worldwide

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The Chinese government's pouring capital into banks has attracted much attention from media at home and abroad. World opinion shows keen interest in Chinese State-owned banks' quickened pace in reform and the prospect of eventually becoming some sort of listed firms.

British Financial Times holds that Chinese State Council choosing Bank of China and China Construction Bank for trial marks the beginning of a series of long-lasting reforms with an aim to improve the situation of overly high rate of non-performing asset and inadequate capital sufficiency rate in State-owned banks.

Associate Press points out China's State-owned banks are now engaged in the modernization drive, so as to meet competitions with overseas banks. The reform conducted in line with a joint-stock system declared on January 6 is a necessary measure taken to make these banks become more competitive and have greater profit-making capability.

Reuters says, US$45 billion has been evenly distributed between two big banks at the end of 2003 while the news was not released until January 6, 2004. Analysts think that the government capital-injection move has paved the way for the listing of China's four big State-owned banks, while the reform of China's banking industry still faces a heavy task and a long way to go.

Report by Bloomberg News Agency says China Construction Bank is expected to issue US$ 5 billion worth of stocks and Bank of China will start listing in 2005. From the year 2003, investors have been interested in the listing of China's conceptual stocks. A funds manager with Singapore Commercial Bank Asset Management Company feels very excited about the listing plan, saying that with the rapid development of China's economy, it is very meaningful to hold shares in China's financial industry.

As Sing Pao Daily Hong Kong puts it, China's State Council has decided to divert US$45 billion from the nation's foreign exchange reserves and inject it into the Bank of China and China Construction Bank as pilot units for banking reform in line with a joint-stock system. Meanwhile, China will formally establish Central Exchange Investment Co., Ltd. to supervise the capital flow of the two banks and ensure ideal returns on the injected funds. Personages in China's financial circle hold that the act made by the central government for the first time to inject capital from foreign exchange reserves into banks can mitigate pressure on the central financial department and alleviate pressure on revaluation of the RMB (People's Currency).

Hong Kong Ta Kung Pao reports that a personage with the State Foreign Exchange Administration says that the said amount of US$45 billion had been put in place at the end of last year. This portion of funds is said to be all spot exchange. The report adds that the move is officially regarded as a "useful attempt. " Source with the State Foreign Exchange Administration says that the measure has been approved unanimously by both the central bank and the Ministry of Finance and the current mainstream comment is that the move is "positive and feasible." It is learned that the amount of funds infused takes up nearly 10 percent of the nation's foreign exchange reserves.

Hong Kong Wen Wai Po quotes foreign news agencies as saying that China's announcement on January 6 to offer emergency financial aid to the two banks is a major move indicating its determination to rectify the banking industry.

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