The Chinese government's proposed capital injection for several state-owned financial institutions signals a clear objective of boosting the financial system's resilience, Fitch Ratings said in a Monday release.
The state injections will raise capital buffers, improve loss-absorption capacity and strengthen the entities' ability to shore up policy priorities and economic growth, Fitch said.
The banks and insurers covered by the measure include Industrial and Commercial Bank of China (SHA:601398, HKG:1398), Agricultural Bank of China (SHA:601288, HKG:1288), The Export-Import Bank of China, China Export & Credit Insurance, China Life Insurance (Group), China Taiping Insurance Group, People's Insurance Co. (Group) of China and China Reinsurance (Group).
The support should help insurers narrow increasing capital burden and boost risk-absorption capacity, especially given their strategic role for the financial system, Fitch said.
The injections could boost the insurers' Fitch Prism Global model capital scores by around three to four percentage points, the rating agency said.
Meanwhile, the injection could improve Industrial and Commercial Bank of China's and Agricultural Bank of China's pro forma CET1 ratios by 34 basis points and 60 basis points, respectively, Fitch said.
Stronger capital is a credit positive for banks' viability ratings, while better system resilience is also credit positive for Fitch's operating environment and assessment.