Capital infusion to promote long-term growth

Editor's note: On Sunday, eight central financial enterprises announced plans to replenish their capital. Among them, the Industrial and Commercial Bank of China and the Agricultural Bank of China plan to raise up to 260 billion yuan ($38.7 billion) combined through A-share issuances to designated investors. The Ministry of Finance will inject 30 billion yuan into the Export-Import Bank of China and 10 billion yuan into the China Export & Credit Insurance Corporation. The ministry will also provide capital to four State-owned commercial insurance companies. Below are excerpts of comments from companies and experts, including Yu Xiang, chief analyst of policy research at CITIC Securities, on the capital replenishment, as reported by Xinhua News Agency. The views don't necessarily represent those of China Daily.

Technological innovation, industrial upgrading and domestic demand expansion need the backing of strong financial institutions. This capital injection is more than just replenishing capital for financial institutions. It is designed to enhance their capital strength to further improve the financial system's capacity to serve the real economy.

Last year, the Ministry of Finance issued 500 billion yuan in special treasury bonds to bolster the core Tier-1 capital of large State-owned commercial banks. This year's capital infusion is a proactive step aimed at promoting long-term development, like the move last year.

The difference is that the current round of capital infusion extends beyond commercial banks to include policy-oriented financial institutions and State-owned commercial insurance companies, thus covering a wider range of financial institutions. These different types of financial institutions, each having its unique focus, will form a diversified funding base for the real economy.

Policy-oriented financial institutions are tasked with implementing the country's economic and social development policies. They are included in the capital infusion plans with the aim of enhancing their ability to support these strategies. After their capital is replenished, the Export-Import Bank of China and the China Export & Credit Insurance Corporation will be better positioned to undertake counter-cyclical adjustments and provide stable medium- and long-term funding for major projects and industrial transformation.

The move will significantly boost the Export-Import Bank of China's funding capacity and risk management capabilities, enhancing its ability to serve the real economy and the country's opening-up. It will enable the China Export & Credit Insurance Corporation to expand the coverage of export credit insurance.

Insurance companies serve as shock absorbers for the economy and stabilizers for society. As their capital strength improves, they will be better equipped to manage risks and have more resources to allocate to long-term assets such as equities. This will help leverage the advantages of insurance funds, provide long-term capital to enterprises in the real economy and enhance the stability of the capital market.

The Ministry of Finance plans to issue 300 billion yuan in special treasury bonds in the near future to support this round of capital infusion. This measure shows that the country has adopted a more proactive fiscal policy, reflecting the increased coordination between fiscal and financial policies.