Why China Is Pumping Billions Into Its Financial Sector

China is directing $54 billion into its financial sector as Beijing works to strengthen banks and insurance companies while the country's economy struggles to pick up speed. Several financial institutions have confirmed they are set to receive billions of yuan in fresh capital from state backed sources, including China's ministry of finance and, notably, the state company that oversees the country's tobacco monopoly, according to the Guardian.

The goal behind the funding push is to strengthen the financial sector's capacity to invest in the stock market and keep credit flowing to businesses, at a moment when China, the world's second largest economy, continues to show signs of struggling to break free of sluggish growth.

The People's Insurance Company of China said it intends to raise as much as 15 billion yuan by privately placing A-shares, a category of stock that allows investment specifically in China based companies, with the ministry of finance. The money raised would go toward rebuilding the company's capital base.

The broader insurance industry has been under pressure from persistently low interest rates, which have chipped away at profitability. A number of small and mid sized insurers have reported weakening solvency ratios, a key gauge of financial stability, as a result.

China Life described the capital injection as a meaningful move to strengthen the financial sector's ability to support the real economy and to help push forward higher quality growth across the financial and insurance industries. The company added that the funding would improve its ability to absorb risk.

Sagar is a journalist with an interest primarily in geopolitics and American domestic politics. Before joining Times Now, he wrote for Republic and Sw... View More