China rolls over $36 billion bonds issued to CCB

Chinese government extends maturity of bail-out bonds for another ten years after CCB announced inability to repay loans.

China Construction Bank, now the world’s second-largest bank by market capitalisation, said the Ministry of Finance had issued an order for $36 billion worth of ten-year bonds held on the bank’s balance sheet to be rolled over for another ten years, as stated in a report in The Financial Times.

The announcement is a timely reminder of the unstable foundations of China’s new-found banking success and comes at a time when concerns are being raised over a whole new crop of bad loans emerging from a government-led lending binge this year.

The decision to roll the bonds over for another decade essentially delays another government bail-out of CCB that would have had to come from the Ministry of Finance.

The now expired bonds were issued by state-owned Cinda Asset Management to CCB in exchange for a corresponding amount of the bank’s non-performing loans, at a time when at least a third of Chinese bank loans were not being repaid.