China Plans $142 Billion Capital Injection Into Major Banks, First Since 2008 Crisis To Support Ailing Economy

China is reportedly planning to pump as much as 1 trillion yuan ($142 billion) into its largest state-owned banks to enhance their capacity to support the struggling economy.

The capital injection is expected to be primarily funded by issuing new special sovereign bonds, Bloomberg reported citing sources.

The details have yet to be finalised and are subject to change.

This would mark the first instance since the 2008 global financial crisis that Beijing has injected capital into its major banks.

The move is part of broad stimulus measures Beijing introduced this week to boost China's ailing economy and sluggish markets.

Major banks in China have been struggling with shrinking margins, faltering profits and rising bad loans amid slowing growth and an unprecedented property sector crisis.

Earlier this week, Li Yunze, China’s top banking regulator, announced at a press conference in Beijing that steps would be taken to increase the core tier 1 capital of the nation’s six largest commercial banks, though no further details were provided.

China's large banks have faced increasing regulatory pressure to assist the ailing economy by providing lower-interest loans to high-risk borrowers, including real estate developers, homeowners, and financially strained local government financing entities.

Recently, several banks responded to government appeals by issuing their first-ever interim dividends to boost the stock market, despite their profit growth and margins continuing to shrink.

The six largest banks — which also include Agricultural Bank of China Ltd., China Construction Bank Corp., Bank of Communications Co., and Postal Savings Bank of China Co. — have primarily relied on retained profits to increase capital buffers.

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