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China gives Agricultural Bank $19 billion bailout
2008-11-07
SHANGHAI, China - The Chinese government has given the Agricultural Bank of China a $19 billion bailout in a major step toward restructuring the rural lender as it prepares to issue publicly traded shares. The funds, from Central Huijin Investment, a unit of China's sovereign wealth fund, are meant to "boost the bank's capital, improve the balance sheet and strengthen profitability," Agricultural Bank said in a statement seen Friday on its Web site. Although investor sentiment has been dulled by a lengthy share market correction, Beijing is moving ahead with restructuring and listing the state-owned bank's shares as part of wider reforms aimed at boosting incomes and productivity in rural areas that have lagged behind China's booming cities. Central Huijin and the Ministry of Finance will each hold 50 percent of the bank following the 130 billion yuan ($19 billion) bailout, the bank said. The Agricultural Bank is the last of China's four major state-owned commercial banks to be restructured in preparation for a share listing. The move was delayed by the heavy load of bad debts carried by the bank. The government has not said when the bank will list its shares. The ruling Communist Party last month approved a landmark reform that for the first time will let farmers lease or transfer their land. The change in control of land rights was viewed as a crucial step in revitalizing the rural sector and creating larger, more efficient farms. Central Huijin has also provided billions of dollars in bailouts to other big state commercial banks -- Bank of China, Industrial & Commercial Bank of China and China Construction Bank following massive write-offs by those lenders. Agricultural Bank reported that bad loans accounted for about a fifth of its total lending as of the end of June. It had assets totaling 6 trillion yuan ($878 billion) by the end of 2007, according to its annual report. ___ On the Net: Agricultural Bank of China: http://www.abchina.com/en/hq/index.jsp/langen/index.html
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