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ICBC cap-raising plan shows trouble ahead for China banks

ICBC’s announcement that it will undertake a three-pronged assault on the equity markets in order to bolster its capital base is a warning signal for China’s banking sector.

ICBC is being forced to sell Rmb25 billion ($3.7 billion) of convertible bonds and is also likely to sell new shares on the Hong Kong and Shanghai exchanges.

ICBC’s loan book expanded an incredible 16.2% last year as China’s leading banks pumped credit into the country’s economy in an effort to maintain growth.

The question is: if China’s biggest and strongest bank is having to raise this amount of capital, what does that mean for the country’s other financial institutions?

Subscribers to Euromoney can today get an early view of an in-depth look at the problems facing China’s financial markets which will be published in our April issue.

Stimulus spree leaves China on a knife-edge April 2010 The deployment of China’s 2008/09 economic stimulus package ignored the mistakes made in the country’s previous attempts to revitalize the market. Local authorities were flooded with cash, prompting reckless investment decisions. The dimensions of the folly are as yet unclear but there’s no doubt that a massive non-performing loans crisis will ensue. Elliot Wilson reports.

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