In its latest move to rescue the mainland's ailing securities industry, the investment arm of the People's Bank of China has agreed to inject one billion yuan into the second-biggest brokerage and lend it an additional 1.5 billion yuan Guotai Junan Securities said in a statement yesterday it would receive the investment from Central Huijin Investment, in return for a 21 per cent stake, making it the second-biggest investor after the Shanghai bureau of the State Assets Supervision and Administration Commission, which holds 23 per cent. Huijin will hold the stake for at least three years and appoint two directors to the board. On Tuesday, Shenyin Wanguo Securities, the country's third-largest brokerage, said it would receive an injection of 2.5 billion yuan in capital and a loan for 1.5 billion yuan. The investments are part of the government's effort to consolidate the industry, which has been losing money during a four-year bear market, and attract investors back into equities. Wang Yiguo, an analyst at Southern Securities, said it was reasonable for the government to give money to the brokerages because their losses were in part the result of past official policy. 'But it will only compensate the key brokers. This is a good sign for the market. In future, Huijin can sell its shares to foreign investors in order to diversify the risk away from the government. It cannot do it now as the market is not open,' Mr Wang said. As one of the biggest players, with an asset management joint venture with Allianz of Germany, Guotai Junan was always high on the list for official help. Over the past 20 months, the government has closed or merged two dozen brokerages and is likely to close a further 20. According to official figures, the country's 130 brokerages suffered a 45 per cent drop in revenue in the first half, 9.57 billion yuan down from 17.47 billion in the same period last year. Commissions from A-share trading fell to 8.3 billion yuan from 15.26 million yuan. The injection will take Guotai Junan's registered capital to 4.7 billion yuan. In an interview published yesterday in the China Securities Journal, Guotai Junan chairman Zhu Youyi said that, between 1999 and 2003, his firm had underwritten the issue of A and B shares and convertible bonds for 84 companies, raising more than 50 billion yuan. 'This shows the great support of the government for a new kind of securities firm, its ambition to set up first-class, large-scale national brokerages and determination to guarantee the stable and healthy development of the capital market,' Mr Zhu said. The firm was formed in 1999 by a merger of Guotai and Junan Securities, two of the oldest brokerages established after the formation of the stock market in the early 1990s. But, despite the injection, analysts remain uncertain about the Shanghai market, which is down about 6 per cent this year and may fall further because of a government plan to sell billions of yuan in state shares of listed companies.