China to Inject $55 Billion into Major Banks to Bolster Economy

China is preparing to recapitalize three of its largest banks in the coming months, according to Bloomberg, citing sources familiar with the matter. The move follows a broader stimulus package announced last year to support the struggling economy.  

Authorities are considering injecting at least 400 billion yuan ($55 billion) into Agricultural Bank of China, Bank of Communications, and Postal Savings Bank of China. The plan could be completed as early as June, though the final amounts for each bank are still under review and subject to change.  

Despite China's six largest banks maintaining capital adequacy ratios well above regulatory requirements, Beijing remains committed to strengthening its banking system. In recent years, Agricultural Bank and Postal Savings Bank have been directed to support economic growth by extending low-interest loans to riskier borrowers, leading to record-low profit margins and rising bad debt levels.  

Chinese banks typically boost capital reserves through retained earnings and, in some cases, aggressively issue bonds to take advantage of lower market rates. However, Beijing's direct capital injection will be the first of its kind since the 2008 global financial crisis.