China’s finance ministry is set to inject $54 billion into the country’s state-run banks and insurers in an effort to shore up capital across its financial system.

The package, announced yesterday through statements by the companies involved and reported by state news agency Xinhua, totals 360 billion yuan ($54 billion). Around 290 billion yuan of it will go to Chinese banks, split between 160 billion for the Agricultural Bank of China (ABC), 100 billion the Industrial and Commercial Bank of China (ICBC), and 30 billion for the Export-Import Bank of China.

The ABC and ICBC will raise the funds through A-share issuances to designated investors, including the finance ministry and the China National Tobacco Corporation. They will use the proceeds to replenish their core Tier-1 capital.

Core Tier-1 capital is the highest quality form of capital and serves as a key buffer against financial risks. By increasing the capitalisation of these banks, they are likely to be able to increase their lending capabilities, Xinhua said.

The Export-Import Bank, a major provider of trade finance in the country, will receive 30 billion from the ministry of finance to “better support its policy-finance mandate and service major national strategies”, Xinhua reported.

Also within the realm of trade financing, state-backed insurer the China Export & Credit Insurance Corporation has reported it will receive an injection of 10 billion yuan.

The remaining funds will go to four major Chinese insurers, including 35 billion for China Life Insurance Group, seven billion for China Taiping Insurance Group, up to 15 billion for The People's Insurance Company of China and three billion for the China Reinsurance Group.

These funds will be used to strengthen their capital positions, solvency and risk resilience, according to statements released Sunday.

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