China needs at least one trillion yuan to help the country's largest state-owned banks reduce bad loans and prepare them for domestic share sales, according to Fitch Ratings

Business Asia, Dec, 2003

China needs at least one trillion yuan ($163 billion) to help the country's largest state-owned banks reduce bad loans and prepare them for domestic share sales, accord ing to Fitch Ratings. The amount a 10th of China's gross domestic product last year, is the minimum needed to allow the banks to meet a Government requirement they reduce non-performing loans to 15 per cent of total lending before they can sell shares publicly on the mainland, said Arthur Lau, a director at the ratings company.

"This does not include city commercial banks and credit cooperatives," Lau said. "The costs are potentially much bigger." Fitch forecasts the bailout could cost as much as 30 per cent of China's gross domestic product. Chinese Premier Wen Jiabao said the Government would inject more money into its four largest banks within six months to help cut bad loans it estimates are more than a fifth of total lending.