Beijing is considering a multi-billion-yuan recapitalisation of its technically insolvent big four state banks, ahead of a key meeting this week of China's financial policy-making institutions aiming at reforming the sector.
Detailed proposals have yet to be finalised, but banking officials and analysts hinted that the range could be between 300 billion yuan (about HK$281.6 billion) and 600 billion yuan - possibly towards the high end.
'The news is overwhelming,' Arthur Lau, a China analyst at ratings agency Fitch, said yesterday.
Beijing-based Business Post reported on Saturday that a US$40 billion (328 billion yuan) capital injection was looming. That would follow the 1998 injection of 270 billion yuan and the 1999 transfer of 1.4 trillion yuan worth of bad loans to asset management firms.
Officials declined to comment yesterday, but Salomon Smith Barney economist Huang Yiping said: 'The recapitalisation is likely to happen, following recent heated government talks.'
Analysts have long been calling for swifter methods, including a 'big bang' approach, to reduce bad loans. Mr Huang said the big four's huge non-performing loans (NPL) could be the hotbed for a 'financial and fiscal crisis'.
