Proposed capital injection to help Chinese megabanks expand loans

It will mitigate pressure from weakening internal capital generation, S&P said.

Proposed capital injections from the central government will give China’s megabanks more ability to fund the country’s growth, according to S&P Global Ratings.

"The injection will enhance the megabanks' capital position to fund loan expansion," said S&P Global Ratings credit analyst Xi Cheng.

The plan will help mitigate the pressure from weakening internal capital generation and give the banks more flexibility to grow while maintaining a sufficient capital buffer, she said.

On 5 March, political leaders announced plans to issue CNY500b billion in special government bonds in 2025 to recapitalize China's six largest commercial banks: Bank of Communications, Industrial and Commercial Bank of China, China Construction Bank, Bank of China, Agricultural Bank of China, and Postal Savings Bank of China. These six account for half of commercial banks’ total assets.

Cheng expects the megabanks to continue prioritizing areas such as inclusive finance, advanced manufacturing, and green energy in lending out money.

Megabanks are the major executors of policy initiatives such as expanding inclusive finance at affordable rates, mortgage repricing, and fee reduction, S&P said.