The China Investment Corporation (CIC) has confirmed that it will soon inject capital into the Agricultural Bank of China (ABC) and China Development Bank (CDB) to finance their restructuring.

 

Lou Jiwei, CIC chairman, denied reports that the $200-billion sovereign fund would purchase a stake in the Australia-based ANB banking group.

 

Meanwhile, central bank chief Zhou Xiaochuan said yesterday China will soon reveal plans to restructure the Agricultural Bank of China.

 

Reform plans have been circulated, and the authorities are actively preparing to move ahead with the proposed changes, he told the 2007 China Financial Forum.

 

Lou said at the same gathering that the capital injection will be conducted through Central Huijin, an investment arm that the CIC acquired from the central bank before the fund was formally established in late September.

 

"According to the plan approved by the State Council, Central Huijin will take part in the reform and restructuring of the China Development Bank and the Agricultural Bank of China in the near future," Lou said. No exact timetables for the reform were given.

 

China has used part of its colossal foreign exchange reserves to shore up major commercial banks before they brought in strategic investors and listed on stock exchanges.

 

The ABC, which had a non-performing loan ratio of 23.55 percent at the end of last year, much higher than the other three major banks, is the only one of the "big four" commercial banks that has not undergone share-holding restructuring.

 

The State also wants the CDB to become more commercialized. To achieve this end, the authorities plan to inject capital and restructure the bank.

 

Lou said that after the reform, the CIC will not have a hand in the daily management of the ABC, but will express its voice through a board member when it comes to major decision-making.

 

Lou also said that the CIC had not taken a stake in Australia and New Zealand Banking Group Ltd. There had been reports that the CIC might have bought a stake of less than 5 percent in the Australian lender.

 

(China Daily December 26, 2007)