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China's Agricultural Bank needs capital injection before reform
Shanghai (AFP) May 25, 2006 A senior Chinese banking official said the state-owned Agricultural Bank of China would need a major capital bailout before the debt-ridden lender can be restructured, state press said Thursday. "The bank's historical burdens are too heavy and it would need a capital injection to start up any shareholding reform," the Shanghai Securities News cited Wang Jianxi, vice chairman of the major state investment agency, Huijin. "Maybe we will use Huijin's foreign funds as a means to capital injection," said Wang. "It is also possible to use another capital injection method or a combination of foreign capital and domestic funds." Wang's comment follow a report this week that said China's central bank had proposed to the State Council, the cabinet, a dismantling of the debt-ridden bank that would force the provinces to take on some of the bank's debt burden. But Li Zhicheng, director of the central bank's research department, told the official Xinhua news agency Wednesday that the People's Bank of China had never submitted such a proposal. It is estimated that the bank would need some 60-70 billion dollars to clear its non-performing loans before it could meet overseas listing standards -- as regulators had hoped and the three other major banks are doing. Of China's four main state lenders, Agricultural is the only one which has not begun any reforms since Beijing initiated between late 2003 and April 2005 two bailout packages worth 60 billion dollars to help clear bad debts and prepare the banks for foreign listing. Chinese banks have long been saddled with billions of dollars of stressed loans, a consequence of indiscriminate lending when more ideological political goals outweighed commercial gain. China Construction Bank was the first bank to list in Hong Kong last month, while Bank of China is currently wrapping up last minute preparations for its initial public offering in the former British Colony on June 1. The Industrial and Commercial Bank of China is expected to follow suit a few months later.
Source: Agence France-Presse
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