China Targets Financial Stability With $54 Billion State Insurer Capital Boost

China’s Ministry of Finance will spearhead a combined $54 billion capital injection into state-owned insurers, with the move aimed at strengthening capital across the country’s financial system.

The insurance sector has faced declining profitability amid persistently low interest rates, with several small and mid-sized insurers reporting weaker solvency ratios.

Details

China Life Insurance (Group) Co, the nation’s largest life insurer, will receive 35 billion yuan ($5.2 billion), while China Taiping Insurance Group will receive 7 billion yuan.

Also, People’s Insurance Company (Group) of China plans to raise up to 15 billion yuan through a private placement of A-shares to the Ministry of Finance, using the proceeds to replenish capital.

Moreover, China Export and Credit Insurance Corp said the ministry will inject 10 billion yuan to strengthen its core capital, while China Reinsurance (Group) will raise 3 billion yuan.

Funds To Boost Economy

China Life said the capital injection will improve the financial sector’s ability to support the real economy and promote the development of the financial and insurance industries, while strengthening its risk resilience.

Taiping said the funds would improve its solvency and other key financial indicators.

Three state lenders will receive a combined 290 billion yuan in capital injections. Agricultural Bank of China and Industrial and Commercial Bank of China plan to raise up to 160 billion yuan and 100 billion yuan, respectively, through private A-share placements to the Ministry of Finance, China National Tobacco Corp and its subsidiaries.

The Export-Import Bank of China will receive a 30 billion yuan capital injection from the Ministry of Finance to strengthen its capital base.

The measures is expected to strengthen state insurers that have been asked to support the stock market with medium- and long-term funds and help regulators oversee smaller, higher-risk insurers.

The proceeds will replenish core Tier 1 capital and support continued credit expansion amid weak loan demand and pressure on banking-sector profitability.

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