China's Premier Wen Jiabao (溫家寶) yesterday said he was not fully assured that a US$45 billion capital injection into two state commercial banks would be able to turn the badly indebted sector around.
"The central government has decided that share-holding reforms should be adopted by the Bank of China and the China Construction Bank and has injected US$45 billion," Wen told journalists at the close of the National People's Congress session.
The injections were aimed at improving the bank's capital adequacy ratios and pave the way for their listings overseas.
"To tell you the truth, on this issue I don't feel very assured, but there is no other way out. This reform, as far as we are concerned, has placed our backs against the wall," Wen said.
Non-performing loans made up some 20 percent of all lending, or nearly 2 trillion yuan (US$241 billion), at China's four major commercial banks, Wen said.
The only way to stop the hemorrhaging was to deepen reform, he said. To this end the two banks should become "fully modernized shareholding banks" in three years, and by that time seek listings on overseas stock exchanges, Wen said in his work report to the congress earlier this month.
"Adopting this kind of strong measure means that this is really a battle that we can't afford to lose. We must be determined to ensure that the reform is successful," he said.
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