On September 6, ICBC and Agricultural Bank of China unveiled private placement plans, aiming to raise up to 100 billion yuan and 160 billion yuan respectively, with the Ministry of Finance (MOF) subscribing for 70 billion yuan and 130 billion yuan to replenish core Tier 1 capital. This marks the launch of a second round of capital replenishment for the six major state-owned banks, all of which have now entered or completed this cycle.

Meanwhile, PICC and China Re disclosed plans for private placements to the MOF of up to 15 billion yuan and 3 billion yuan, while China Life Group, China Taiping, China Exim Bank, and Sinosure received capital injections of 35 billion yuan, 7 billion yuan, 30 billion yuan, and 10 billion yuan on the same day. The support scope now extends to insurers and policy financial institutions, with total MOF contributions reaching 300 billion yuan, precisely matching the special bond quota outlined in the government work report.

The move reflects fiscal-monetary policy coordination, helping to solidify capital foundations, boost capacity to serve the real economy, and send a clear signal of stability and confidence. The placements are priced at market value with a five-year lock-up period, underscoring their long-term capital nature.

Where the plan stands

On September 6, eight central financial enterprises simultaneously announced capital increase plans, with the MOF injecting a combined 300 billion yuan. ICBC's board approved a private placement of up to 100 billion yuan, with the MOF subscribing for 70 billion yuan, China National Tobacco Corporation for 10 billion yuan, and four tobacco-related entities for 5 billion yuan each. Agricultural Bank of China plans to raise up to 160 billion yuan, with the MOF subscribing for 130 billion yuan and various tobacco companies participating alongside Shuangwei Investment, which also introduced the tobacco system as a strategic investor.

Both banks set the issuance price at no less than the average trading price of A-shares over the 20 trading days before the offering period, with all subscribers paying in cash and subjecting their shares to a five-year lock-up. Proceeds will go entirely toward replenishing core Tier 1 capital. PICC also announced a private placement of up to 15 billion yuan to the MOF, fully subscribed in cash, while China Re plans to issue domestic shares worth 3 billion yuan at 1.33 yuan per share, a premium to its H-share market price, with the subscriber committing to long-term holding.

Second round for major banks begins

The placement disclosures mark the official start of the second round of capital replenishment for large state-owned banks, following the first round completed by Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China in 2025. The process has been advancing for more than a year, with regulators outlining a phased, bank-by-bank approach in September 2024. Both rounds were first mandated in government work reports and funded through special treasury bonds, totaling 800 billion yuan in MOF support.

With the latest plans disclosed, all six major banks have now entered or completed their capital replenishment arrangements. This bolsters their capital buffers amid narrowing net interest margins, supporting stable credit growth and enhancing their ability to fund key sectors such as technology innovation, green development, and inclusive finance.

Coverage expands to insurers and policy banks

Unlike the first round, which covered only commercial banks, this round extends to insurance conglomerates and policy financial institutions. PICC has disclosed its placement plan, while China Life Group, China Taiping, Sinosure, and China Re have all received MOF injections. China Exim Bank also received capital, further extending coverage to policy banks.

The MOF's total contribution of 300 billion yuan precisely matches the special bond quota, creating a complete closed loop between fund allocation and bond issuance. For insurers, this strengthens solvency and risk resilience, while for China Exim Bank, it enhances credit supply to support foreign trade and opening-up efforts.

Market-based pricing with long-term capital focus

The placements are priced at market value without discount, reflecting fair value and minimizing dilution for existing shareholders. The five-year lock-up period distinguishes these subscribers—including the MOF and tobacco system entities—from short-term arbitrageurs. Agricultural Bank of China also signed a strategic cooperation agreement with the tobacco system, adding business synergy beyond the capital link.

China Re's plan further confirms this approach, with a premium issuance price and a commitment to long-term holding. The MOF's willingness to subscribe at market or even premium prices signals recognition of long-term value and protects minority shareholder interests, boosting market confidence.

Strengthening capital and service capacity

Data as of end-June 2026 shows the six major banks' core Tier 1 capital adequacy ratios ranging from 10.04% to 14.24%, all comfortably above regulatory requirements, with non-performing loan ratios between 1.00% and 1.30%. However, with net interest margins narrowing to 1.41% for the banking sector, internal capital generation has weakened, making external replenishment through special bonds a forward-looking move during a window of operational stability.

Improved capital levels will directly enhance credit deployment capacity for key areas such as technology, green transition, and inclusive finance. For insurers, the injection boosts solvency and risk protection, while for policy institutions like China Exim Bank and Sinosure, it strengthens their ability to serve the real economy and support high-level opening-up, contributing to stable foreign trade and investment.

Market reaction to first round offers precedent

Following the first round of placement disclosures on March 30, 2025, the four recipient banks posted significant gains and outperformance. In the first trading week, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank rose 2.91%, 4.69%, 4.21%, and 0.38% respectively, versus a 1.37% decline in the CSI 300, generating excess returns of 4.28%, 6.07%, 5.58%, and 1.76%. Even during the April 7 tariff shock when the CSI 300 fell 7.05%, these banks demonstrated notable resilience, with cumulative excess returns widening further.

The positive reception to the first round suggests that market-based pricing and long-term lock-ups resonate well with investors. With China Re issuing at a premium and the MOF effectively yielding value to the secondary market, this round signals continued support for market stability and shared long-term value creation, reinforcing investor confidence in the banking sector.

Risks to monitor

Key risks include slower-than-expected policy implementation, economic slowdown pressures, ongoing real estate market volatility, potential local government debt concerns from declining land sales, and geopolitical tensions that could affect global markets and domestic stability.