Economy

Markets

Industries

Insights

Reports

Events

Eximbank may get capital shot soon

By Wang Bo and Mao Lijun (China Daily)
Updated: 2009-11-12 08:55

China Eximbank, a wholly State-owned policy lender, may get a capital boost from the government as early as January next year to help kickstart its long-awaited restructuring process, sources with knowledge of the matter said yesterday.

China Central Huijin Investment Co, an investment arm of the nation's sovereign wealth fund, will be the only entity that will infuse capital into the bank, one source at China Investment Corporation, who declined to be named, told China Daily.

"A restructuring plan for the bank has been submitted to the State Council for approval, though the amount of cash injection has yet to be decided," the source said.

The State-owned trade financier, which has been on the restructuring radar since 2007, needs government funds to bail itself out of the lending mess arising from non-performing loans given to government-favored projects.

Another source at the Ministry of Finance, who asked not to be named, said the bank will not be transformed into a commercial entity and will remain committed to supporting the country's export and import development by offering favorable financial services even after the restructuring.

"The bank will retain its function as a lending arm of the government, but it will also be allowed to do some commercial lending businesses as an important source of revenue," the source said.

This is a far cry from the reform path that China Development Bank (CDB), another major policy lender that funds the nation's large infrastructure projects, went through after it was relaunched late last year.

The government thought of overhauling CDB into a pure commercial bank in its original reform blueprint, but the drive to fully commercialize the bank lost steam after the global financial crisis.

China Eximbank had total assets of 566.7 billion yuan ($ 83.01 billion) by the end of 2008 and earned a profit of 199.6 million yuan last year, its 2008 annual report showed.

Related readings:  Eximbank in discussions to loan ENRC $876m  China Eximbank, ADB sign co-financing agreement  Eximbank grants loans to support carmaker Chery's expansion  China Eximbank loads up support for shipbuilders

Earlier, it was reported that Central Huijin would sell as much as $11.7 billion in bonds to inject $12 billion to China Eximbank and $4 billion to China Export and Credit Insurance Corp, Bloomberg reported yesterday, citing people close to the matter.

"It is very rare for Huijin to issue bonds to finance the recapitalization of banks, as the common practice earlier was that Huijin injected money it received from the nation's foreign exchange reserves directly into the banks," the source at China Investment Corporation said, adding that he was unaware about the bond issuance.

The government spent about $650 billion to recapitalize major State-controlled commercial lenders, including the Industrial and Commercial Bank of China and Bank of China, in an effort to help them eventually float shares in a row a couple of years ago.

After completing the restructuring process of China Eximbank, the government may embark on reforming the Agricultural Development Bank.