Thu, Aug 20, 2015 - Page 15 News List

China injects US$93bn into banks as stimulus

NEEDED BOOST:The central bank put US$48bn into the China Development Bank and US$45bn in the Export-Import Bank. Foreign investment rose 5.2% last month


A collector of recyclable materials rides a tricycle through a business district of Beijing, China, yesterday.

Photo: EPA

China has injected nearly US$100 billion from its foreign exchange reserves into two policy banks, which lend based on government directives, to help spur the country’s sluggish economy, state media reported.

The central bank on Tuesday completed putting US$48 billion into the China Development Bank (國家開發銀行) and US$45 billion into the Export-Import Bank of China (中國進出口銀行), Xinhua news agency reported.

The move was to enhance their capital base and support the economy, it said.

“The injection suggests the central bank is trying to guide funds to go to the real economy, like exports and infrastructure construction,” Barclays Capital China economist Wang Shengzu (王勝祖) said.

China’s economy, the world’s second-largest, expanded 7.4 percent last year, its weakest since 1990, and has slowed further this year, growing 7 percent in each of the first two quarters.

The government has set a target of about 7 percent growth for all of this year.

In a bid to stimulate activity, China has cut interest rates four times since November last year, and has also lowered the reserve requirement ratio — the amount of money banks must put aside.

“The funds released from earlier monetary loosening didn’t go to the real economy. Instead, most of it went to the financial institutions and the stock market,” Wang added.

The benchmark Shanghai stock index rose 150 percent in 12 months to mid-June in a borrowing-fueled surge, before plummeting almost one-third in three weeks.

The Wutongshu Investment Platform Co (梧桐樹投資平台), which invests China’s foreign exchange reserves, carried out the bank fund injections and will become a shareholder in both financial institutions, Xinhua said.

China’s foreign exchange holdings are the world’s largest, though they fell to US$3.69 trillion at the end of June, down from US$3.73 trillion at the end of March.

Separately, foreign investment into China rose 5.2 percent last month compared with the previous year, largely on the back of mergers and acquisitions by overseas firms, the Chinese Ministry of Commerce said yesterday.

Overall foreign direct investment (FDI), which excludes financial sectors, was US$8.22 billion last month, the ministry said, and US$76.63 billion in the first seven months of the year, a 7.9 percent increase.

“The amount and the proportion of foreign capital mergers and acquisitions rose sharply between January and July,” it said in a statement.

The proportion of megers and acquisitions activity in FDI rose to 18.2 percent in the January-July period, it added, up from 4.6 percent in the same seven months a year ago.

China’s outbound overseas direct investment (ODI) last month was US$7.5 billion, a sharp decline of 18.6 percent compared to a year earlier and the second consecutive monthly fall after one of 15.5 percent in June, the ministry said.

Full year ODI growth is still expected to be 10-15 percent or “even higher,” ministry spokesman Shen Danyang (沈丹陽) said.

ODI in the January-July period rose 20.8 percent year-on-year to US$63.5 billion.

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