By Xin Zhiming (China Daily)
Updated: 2007-12-31 14:58

The China Investment Corporation (CIC) signed an agreement with the China Development Bank (CDB) today on injecting $20 billion into the policy bank to help its commercialization drive.

The deal was conducted through the Central Huijin, an investment arm that has been incorporated into CIC before the latter was formally launched at the end of September, according to a central bank announcement today on its website.

Lou Jiwei, head of the CIC, the country's $200 billion sovereign fund, said recently that the company will "soon" carry out the recapitalization move.

The CDB, with a non-performing loans ratio below 1 percent - much lower than that of China's major commercial banks, has seen its lending expand rapidly, which is a built-in factor for the recapitalization, analysts said.

In 2001, it extended policy lending of 176 billion yuan ($24 billion) before it increased to 546 billion yuan in 2005.

The injection will raise the capital adequacy ratio and push the CDB further on the way to more commercialized operation, said the central bank statement.

Last year, the ratio of CDB was about 9 percent. The recapitalization will ensure the ratio remain high enough even after its lending expands, analysts said.

The Central Huijin has injected capital in major Chinese banks such as the Industrial and Commercial Bank of China and China Construction Bank to help their shareholding reform.