China will issue special sovereign bonds to recapitalize some of its largest banks, reports Bloomberg. The move marks an expansion of Beijing’s efforts to fortify the nation’s $69 trillion financial system against a cooling economy and market volatility.
A total of RMB 300 billion ($44 billion) worth of special government bonds will be sold this year to replenish core tier-1 capital at large commercial banks, according to a Ministry of Finance report seen by Bloomberg.
The fresh capital injection is designed to provide banks relief for profit margins, which have been eroded by falling interest rates. The capital allows for expanded lending capacity and larger provisions for potential bad debts.