China announced a US$45 billion plan yesterday to turn two major state-owned banks into free-standing corporations -- a step meant to create profitable competitors as Beijing prepares to open its financial markets to foreign rivals.
The money will go to replenishing the capital of Bank of China and the China Construction Bank, state media said. Like other Chinese state banks, the two are struggling under a mountain of bad loans to state companies that have depleted their assets.
The banks are to be turned into corporations with shareholders and boards of directors, said the Xinhua News Agency and newspapers. They said "foreign strategic investors" would be invited in, but gave no indication that private investors might be allowed to buy control of the institutions.
The communist government has said it plans to turn major state-owned companies into such free-standing, profit-driven corporations. But the government says it plans to retain a controlling stake -- how much isn't clear -- in companies in finance and other "strategic industries."
Money to recapitalize Bank of China and the Construction Bank is to come from China's foreign reserves, which total nearly US$400 billion, the reports said.
"The reform aims to turn the two selected banks into commercial banks in the real sense," Xinhua said. It said they would become "modern banking companies, featuring sufficient capital, strict internal control, safe operations, good service and good economic returns."
China's state banks until recently were treated as a source of money to prop up failing government companies, leaving them with too little capital to meet regulator requirements.
Efforts to reform the industry have taken on added urgency as China prepares to meet commitments to the WTO to open its financial markets to foreign competitors by 2006.
A handful of smaller Chinese banks have formed ventures with US, European and other partners, benefiting from access to investment capital and more advanced banking skills.
Bank of China and Construction Bank will be required to reorganize financially, speed up disposal of bad assets and increase their capital reserves, according to Xinhua and major newspapers.
China's banking regulator announced a plan in December for a pilot effort to recapitalize major state banks, but didn't say which would be first.
That came five years after the Ministry of Finance injected 270 billion yuan (US$32 billion) into state banks in an effort -- later judged incomplete -- to restore their balance sheets.
A spokesman for China's foreign exchange regulator was cited by Xinhua as saying the injection of money into the two banks is a "kind of capital investment," not a subsidy.
Xinhua warned that bank officials might be punished for allowing nonperforming loans to pile up, "as will those who have tried to evade repayment of loans by fraudulent means."
KONG-REY: A woman was killed in a vehicle hit by a tree, while 205 people were injured as the storm moved across the nation and entered the Taiwan Strait Typhoon Kong-rey slammed into Taiwan yesterday as one of the biggest storms to hit the nation in decades, whipping up 10m waves, triggering floods and claiming at least one life. Kong-rey made landfall in Taitung County’s Chenggong Township (成功) at 1:40pm, the Central Weather Administration (CWA) said. The typhoon — the first in Taiwan’s history to make landfall after mid-October — was moving north-northwest at 21kph when it hit land, CWA data showed. The fast-moving storm was packing maximum sustained winds of 184kph, with gusts of up to 227kph, CWA data showed. It was the same strength as Typhoon Gaemi, which was the most
TECH EFFECT: While Chiayi County was the oldest region in the nation, Hsinchu county and city, home of the nation’s chip industry, were the youngest, the report showed Seven of the nation’s administrative regions, encompassing 57.2 percent of Taiwan’s townships and villages, became “super-aged societies” in June, the Ministry of the Interior said in its latest report. A region is considered super-aged if 20 percent of the population is aged 65 or older. The ministry report showed that Taiwan had 4,391,744 people aged 65 or older as of June, representing 18.76 percent of the total population and an increase of 1,024,425 people compared with August 2018. In June, the nation’s elderly dependency ratio was 27.3 senior citizens per 100 working-aged people, an increase of 7.39 people over August 2018, it said. That
‘UNITED FRONT’: The married couple allegedly produced talk show videos for platforms such as Facebook and YouTube to influence Taiwan’s politics A husband and wife affiliated with the China Unification Promotion Party (CUPP) were indicted yesterday for allegedly receiving NT$74 million (US$2.32 million) from China to make radio and digital media propaganda to promote the Chinese government’s political agenda and influence the outcome of Taiwan’s elections. Chang Meng-chung (張孟崇) and his wife, Hung Wen-ting (洪文婷), allegedly received a total of NT$74 million from China between 2021 and last year to promote candidates favored by Beijing, contravening the Anti-Infiltration Act (反滲透法) and election laws, the Chiayi District Prosecutors’ Office said. The couple acted as Beijing’s propaganda mouthpiece by disparaging Hong Kong democracy activists
EARLY ARRIVALS: The first sets of HIMARS purchased from the US arrived ahead of their scheduled delivery, with troops already training on the platforms, a source said The Ministry of National Defense (MND) yesterday said it spotted 35 Chinese military aircraft, including fighters and bombers, flying to the south of Taiwan proper on the way to exercises in the Pacific, a second consecutive day it has reported such activities. The Chinese Ministry of National Defense did not respond to a request for comment on the missions, reported just days before tomorrow’s US presidential election. The US is bound by law to provide Taiwan with the means to defend itself. Its arms sales to Taipei include a US$2 billion missile system announced last month. The MND said that from 9am yesterday,