It’s different for the privately owned. When ICBC, China’s largest state lender, sold Rmb34bn of A-shares in Shanghai in a rights issue last November, buyers included the domestic arm of the sovereign wealth fund, the Finance Ministry and China Life. When Minsheng, the first Chinese lender mostly owned by private firms, sold Rmb22bn of A-shares in a private placement on Friday, buyers included a gearbox manufacturer, a cosmetics developer and a vendor of pig feed. Oh, and China Life.
Never mind that Minsheng chairman Dong Wenbiao was quoted early last year saying that “merely thinking about a capital raising, let alone mentioning it . . . disgrace[s] us”. Circumstances changed. China’s five biggest state-owned banks sold a total of Rmb317bn of equity in Shanghai and Hong Kong in 2010. Expectations that Minsheng, number 10 by assets, would have to do likewise were embedded long before September, when the banking regulator mooted lifting lenders’ minimum tier one capital adequacy ratios from 8 per cent to 10 per cent. For Minsheng – the bank with the biggest exposure to local government financing vehicles, as a percentage of assets – Rmb19bn was the minimum needed to get there, from 8.3 per cent at the end of September.
Amid the shake-up of the register, though, it is worth noting that China Life’s purchase of 500m A-shares is just enough to keep the state-owned insurer as the bank’s second-largest shareholder, behind the founders’ investment vehicle. Minsheng has always made great play of its private roots (while stressing management’s party connections). But China’s largest insurer was openly mooting the acquisition of a bank just four months ago. The 15-year-old lender could end up as another example of the phenomenon known as guojinmintui – the state advances as the private sector retreats.