The Chinese government is at it again. Having already spent at least $45 billion in what may well prove to be vainglorious attempts to fix the country's ailing state-owned banking system, the People's Bank of China (PBC) announced that the State Council has decided to part with another $15 billion of foreign exchange reserves to shore up the capital base of Industrial and Commercial Bank of China, by assets, the nation's largest bank.
Citing the enormous contribution made to development of the national economy by ICBC, the PBC explains that the funds will improve ICBC's core capital adequacy ratio to 6%. Additional issues of subordinated debt will increase this ratio to 8% says the PBC. In exchange for this US$15 billion hand out, ICBC will, "promote the reform in an all-round manner" (sic). The official press release announcing the deal provides a laundry list of good corporate deeds and reforms that ICBC intends to undertake once it has its hands on the money.
It all sounds positive but if the government's previous efforts at fixing Bank of China and China Construction Bank are anything to go by, the moves will amount to little more than a very expensive redesign of the showroom window while the store staff continues to help itself from the stock room.