China is pumping tens of billions of dollars into eight state-owned banks and insurance companies to help shore up the country’s financial system and boost its slowing economy.
The cash injection, which is being led by China’s finance ministry, will total 360 billion yuan ($53.6bn; £39.7bn), state news agency Xinhua said on Sunday.
The outlet said the move “will help further enhance their sound operating capabilities, risk resistance capabilities, and ability to serve the real economy”.
It marks the latest move in Beijing’s attempts to reinvigorate the world’s second largest economy as it faces issues including trade tensions with the West, the impact of the Iran war and an aging population.
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China’s economic growth slowed sharply between the start of April and end of June as weak domestic demand and the Iran war’s impact on oil prices overshadowed the country’s strong exports.
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This weekend’s announcements come as Beijing is aiming to reshape the economy in the face of a number of challenges such as a shrinking workforce [and] a years-long property market slump.
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Insurers Set to Receive Billions
Reports say that China Life Insurance, the country’s biggest life insurer, is in line to receive 35 billion yuan. China Taiping Insurance Group is set to get 7 billion yuan.
The People’s Insurance Company of China said it intends to raise as much as 15 billion yuan by privately placing A-shares, a category of stock that allows investment specifically in China based companies, with the ministry of finance. The money raised would go toward rebuilding the company’s capital base.
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Separately, three state owned lenders announced Sunday that they will collectively receive 290 billion yuan in capital injections of their own.
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Beyond shoring up balance sheets, the initiative is also designed to strengthen state backed insurers that Beijing has already pushed to support the stock market using medium and long term funding. It could additionally put those larger insurers in a better position to help regulators oversee smaller, higher risk insurance firms.
The broader insurance industry has been under pressure from persistently low interest rates, which have chipped away at profitability. A number of small and mid sized insurers have reported weakening solvency ratios, a key gauge of financial stability, as a result.
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[The measure] extends a financing mechanism that had already been used to strengthen several other major state banks over the past year.
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