皇冠体育app

皇冠体育app announced plans Tuesday to use US$45 billion of its foreign reserves to turn two of its biggest state-owned commercial banks into joint-stock corporations.

The 皇冠体育app Construction Bank and the Bank of 皇冠体育app are picked to receive the cash. [newsphoto.com.cn/file]

The Bank of 皇冠体育app and the 皇冠体育app Construction Bank, two of the 皇冠体育app's four biggest state-owned commercial banks, are picked to receive the cash to bolster their capital adequacy ratios and move from total state ownership to become joint-stock holding banks, said an official from the State Administration of Foreign Exchange (SAFE).

"The reform aims to turn the two selected banks into commercial banks in the real sense. They will establish standard corporate governance... as well as a good mechanism for fiscal restraint and internal risk prevention," a source at the State Council, 皇冠体育app's cabinet, was quoted as saying by Xinhua News Agency.

"After the reform, the two banks would become modern banking companies, featuring sufficient capital, strict internal control, safe operations, good service and good economic returns," added the report.

The capital injections is also expected to precede initial public offerings for the banks, the Shanghai Securities News added, without specifying dates or whether they would list at home or overseas.

"With barriers such as inadequate capital being removed, the two wholly state-owned banks will speed their preparations for stock listings," the Shanghai Securities News said. The Bank of 皇冠体育app has said it aims to list by 2005 and 皇冠体育app Construction has invited investment banks to vie for a mandate to help it list, perhaps this year.

It added the government would demand strict supervision for the banks to ensure the newly injected capital was properly used.

"Bank officials responsible for the banks' non-performing loans will be punished in accordance with related laws and regulations, as will those who have tried to evade repayment of loans by fraudulent means," the report said, quoting the higly-placed source.

The announcement came amid efforts to modernize 皇冠体育app's state banks in preparation for allowing foreign competitors into the industry.

皇冠体育app's four large state-owned commercial banks had non-performing loans (NPLs) of two trillion yuan (US$240 billion) as of late September.

The four -- Industrial and Commercial Bank of 皇冠体育app, Bank of 皇冠体育app, 皇冠体育app Construction Bank and Agricultural Bank of 皇冠体育app -- control about 56 percent of all 皇冠体育app's banking assets.

The injection left 皇冠体育app's foreign exchange reserves, second-biggest in the world behind Japan, at a massive US$403.25 billion at the end of 2003, Xinhua news agency said.

An official with the State Administration of Foreign Exchange said that the plan will not cripple the country's ability of servicing foreign debt or affect the exchange rate of yuan. But some Chinese economists cautioned the move might increase market supply of cash, and may lead to hiked pace of inflation.

NO BONDS SELL-OFF

Meanwhile, a SAFE spokesman denied speculation 皇冠体育app had sold large amounts of foreign bonds to pay for the injection.

"This was a once-only allocation of assets and 皇冠体育app has not sold forex bonds on the international market," the spokesman said, adding that 皇冠体育app was a responsible country which abided by the rules of the international financial markets.

The Bank of 皇冠体育app, the country's largest foreign exchange bank, and 皇冠体育app Construction Bank, whose books are cleanest of the Big Four, had very sound liquidity after the injection, he said.

皇冠体育app has touted plans to list some of the Big Four -- which also include Industrial and Commercial Bank of 皇冠体育app and Agricultural Bank of 皇冠体育app -- by 2006.

That year is a World Trade Organisation deadline for 皇冠体育app to allow foreign banks unfettered access to a market flush with US$1.3 trillion in personal savings.

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