(Yicai) March 6 -- The CNY300 billion (USD43.5 billion) in special government bonds China plans to issue this year will likely help large state-owned banks in alleviating operating pressure, according to experts.

This year's special treasury bonds will replenish large state-owned banks' capital amid narrowing net interest margins and slowing profit growth, thereby enhancing their capital adequacy ratios, risk resistance capabilities, and lending capacity, and helping them leverage their resources more effectively to better support the development of the real economy and stabilize growth, experts told Yicai.

China will issue CNY1.3 trillion (USD188.3 billion) ultra-long-term special treasury bonds to support investment and consumption growth and CNY300 billion ordinary special government bonds to supplement large state-owned commercial banks' capital this year, according to the Government Work Report delivered yesterday by Premier Li Qiang at the Fourth Session of the 14th National People's Congress.

The CNY300 billion capital injection could drive about CNY4 trillion in asset expansion, enhancing large state-owned lenders' ability for direct credit issuance and external mergers and acquisitions, strongly supporting the real economy and mitigating financial risks, according to estimates by China International Capital Corporation.

"Last year, four of China’s six large state-owned banks received capital injections of CNY520 billion," said Lin Yingqi, a banking analyst at CICC. "This second batch of CNY300 billion will result in a higher capital injection per bank, mainly because the capital scale of the two other banks is larger."

The four large state-owned lenders that received the capital injection last year are Bank of China, Bank of Communications, China Construction Bank, and Postal Savings Bank of China. The two that will receive it this year are Agricultural Bank of China and Industrial and Commercial Bank of China.

All six big state-owned banks are designated as domestic systemically important banks (D-SIB). ABC, BOC, BOCOM, CCB, and ICBC are classified as global systemically important banks (G-SIB), so they are subject to higher capital adequacy requirements. After its reclassification to a higher bucket last year, ICBC's additional capital requirement was increased to 2 percent.

Based on the latest classification in the G-SIB list, the minimum requirement for the common equity tier 1 (CET1) capital adequacy ratio for ICBC is 9.5 percent. For ABC, BOC, and CCB, the baseline requirement is 9 percent, while for BOCOM it is 8.5 percent.

At the end of the third quarter of last year, the CET1 capital adequacy ratio of ABC was 11.16 percent, and that of ICBC was 13.57 percent, down from 11.42 percent and 14.1 percent, respectively, from the end of 2024.

The capital injection is expected to increase the two major banks' CET1 capital adequacy ratios by an average of 0.6 percentage point, which is slightly lower than the about 1 percentage point increase experienced by the four other lenders last year, Lin predicted.

Injecting capital into state-owned banks is an important measure to strengthen their capital base, enhance their ability to support the real economy, mitigate systemic financial risks, and improve their capability to provide stable dividends, Lin noted.

Editor: Futura Costaglione