(Yicai) Oct. 9 -- China has completed the sale of the first tranche of CNY300 billion (USD44.8 billion) in special treasury bonds that will help to fund a recapitalization of eight major state-owned banks and insurance companies.

The Ministry of Finance issued CNY150 billion of the five-year fixed-rate coupon-bearing bonds yesterday. According to its previously announced plan, the second CNY150 million tranche is scheduled for sale on Nov. 18, and will have a seven-year maturity.

China’s plan to inject CNY360 billion into eight major state-owned banks and insurers, with the finance ministry contributing CNY300 billion, is the broadest recapitalization of the country’s financial institutions in recent years, covering commercial banks, a policy bank and insurers. The immediate objective is to replenish their core Tier-1 capital, thereby bolstering their resilience and boosting their capacity to support the real economy.

The recipients are Industrial and Commercial Bank of China, Agricultural Bank of China, Export-Import Bank of China, and China Life Insurance Group, People's Insurance Company of China, China Taiping Insurance Group, China Export & Credit Insurance, and China Reinsurance Group.

The other CNY60 billion (CNY9 billion) will come from China National Tobacco and its subsidiaries through private placements by ICBC and AgBank, two commercial lenders.

Last year, the finance ministry issued CNY500 billion of special bonds to support capital injections. Together with CNY20 billion from major state-owned enterprises, including China National Tobacco and its units, China Mobile, and China State Shipbuilding, the funds were used to recapitalize Bank of Communications, Bank of China, Postal Savings Bank of China, and China Construction Bank.

The latest capital injections are expected to be implemented after the banks have carried out their interim dividend payment plans, possibly after mid-December, according to Liu Jie, a banking sector analyst at Tianfeng Securities. The timing is intended to avoid diluting the dividend rights of existing shareholders, he said.

This year’s program differs from last year’s by extending capital support to state commercial insurers and policy-based financial institutions, a research report by Guolian Minsheng Securities noted.

The expansion indicates that more emphasis is being put on strengthening the capital positions of non-banks and policy-based institutions, the report said. This is intended to help insurance funds to better serve as a steady source of long-term capital and to strengthen support for the real economy, it said.

Editor: Tom Litting