China to write off US$41b stake in two banks
( 2004-01-15 10:16) (Agencies)
China's Ministry of Finance is preparing to write off a $41 billion stake in
two of the country's Big Four state banks to help them dispose of bad loans and
prepare for listings, the New York Times said on Wednesday.
It cited unidentified Chinese bankers as saying the write-off would affect
Bank of China and China Construction Bank, targets of a massive $45 billion
bail-out at the end of 2003.
China's banks, weighed down by billions of dollars in bad debts owed by state
firms, are the Achilles' heel of the world's sixth-biggest economy, and turning
them around is crucial to maintaining the country's blistering growth.
The injection was part of a government plan to clean up the banks and prepare
them for listings.
The Finance Ministry was sole owner of both banks until the bail-out in late
December, holding $26.6 billion in equity in the Bank of China and US$14.5
billion in construction banks, the New York Times said in a report carried by
the International Herald Tribune.
The bail-out moved US$45 billion in reserves into Central Huijun Investment,
which had taken stakes in both banks. But China's tight foreign exchange policy
prevented the banks from using the money directly to write down bad loans.
"Partly as a result, the banks have now worked out a deal in which they will
write off non-performing loans instead against the Ministry of Finance's earlier
stakes in them," the newspaper said, citing Chinese bankers.
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