China enlists Big Tobacco to boost finance-industry capital injections

When your banking sector needs a capital boost, you apparently reach for the entity that never runs out of cash: the state cigarette monopoly. China is deploying the China National Tobacco Corporation as a strategic investor in a CNY 260 billion (roughly $38.7 billion) capital raise for the Industrial and Commercial Bank of China and the Agricultural Bank of China, announced on September 6. The Ministry of Finance is leading the charge, committing CNY 200 billion across both banks. China Tobacco and its subsidiaries will chip in the remaining CNY 60 billion, split evenly between the two lenders. The shares come with a five-year lock-up period, which Beijing is framing as “long-term patient capital.” How the money breaks down ICBC, the world’s largest bank by assets, plans to raise up to CNY 100 billion through a private placement of A-shares. The Ministry of Finance will provide CNY 70 billion of that, with China Tobacco covering the other CNY 30 billion. Agricultural Bank of China is getting the bigger slice. ABC aims to raise CNY 160 billion, with the MOF contributing CNY 130 billion and China Tobacco again putting up CNY 30 billion. Every yuan raised is earmarked for one thing: ...