| China Central Huijin Investment, an investing arm of China's sovereign wealth fund China Investment Corporation (CIC), has submitted an application for a US$50 billion cash injection from the government, according to sources close to the issue.
Huijin, the parent of Industrial and Commercial Bank of China, Bank of China and China Construction Bank, will use the funds to buy shares in the banks and ensure they meet capital adequacy requirements this year.
CIC said it is necessary for the government to help Huijin finance the buying in order to maintain its controlling stake in those banks.
Currently, only Bank of China has announced a fund-raising plan. China's third-largest lender said at a March 19 shareholder meeting that it plans to issue up to 40 billion yuan (US$5.88 billion) worth of convertible bonds.
Huijin which holds a 67.53 percent stake in Bank of China has a choice – either see its stake diluted or raise capital to buy more stock which means asking the government for funds.
Since the banking regulator has ordered banks to replenish their capital base by limiting payouts to shareholders this year, Huijin has limited options for raising funds to increase its stakes.
Although the other two banks haven't yet announced fund-raising plans, analysts said Huijin will definitely buy more shares, whether the banks choose to raise money through public offerings or private placements.
Huijin estimates that it needs US$50 billion to maintain its controlling stakes in the banks.
"The US$50 billion that Huijin requires may come from foreign exchange reserves, or other sources," said the people close to CIC.
The authorities, including the China Banking Regulatory Commission, are pushing for approval from the State Council as soon as possible, he added.
About Central Huijin Investment
Central Huijin Investment, set up on December 16, 2003, is a state-owned investment company. It is a wholly-owned subsidiary of China Investment Corporation with its own board of directors and board of supervisors. Central Huijin's principal shareholder rights are exercised by the State Council. Central Huijin Investment was acquired from the State Administration of Foreign Exchange by the China Investment Corporation for roughly US$67 billion in 2007. Huijin holds a 57.9 percent stake in Bank of Construction, a 67.53 percent in Bank of China, and a 35.42 percent in Industrial and Commercial Bank of China. |
