China has injected $45 billion into two big state banks in a long-awaited bail-out of the debt-ridden industry.
China tapped its massive foreign exchange reserves to pour fresh capital into Bank of China and China Construction Bank, a State Administration of Foreign Exchange (SAFE) spokeswoman told Reuters.
The injections, completed at the end of 2003, pave the way for eventual initial public offerings of the banks, the official Shanghai Securities News said.
Officials did not specify which bank would get how much or whether all of the injection would go to write down bad loans, but said the money would be used to boost their capital base.
The move was welcomed by analysts worried over the sorry state of China's financial system, weighed down by decades of reckless lending to unprofitable state companies.
The health of the financial system is seen as crucial for China to maintain its blistering economic growth, widely expected to have reached 8.5 per cent in 2003.
China's Big Four banks, which also include the Industrial and Commercial Bank and Agricultural Bank, are saddled with bad debts that officially account for more than 20 per cent of outstanding loans.
But many Western analysts say the bad debt ratios are closer to 40 per cent and regard most banks as technically insolvent.
Analysts estimate the Big Four have at least two trillion yuan ($240 billion) in bad debts and that a $20 billion injection would help bring Bank of China's bad loan ratio down to about 10 per cent. The banks needed to get into single digits before listing, they said.