China is pumping Rmb360bn ($53bn) into its biggest banks and insurers to prop up the financial sector's declining margins and create buffers to boost economic growth. Eight institutions including state-run commercial banks ICBC and Agricultural Bank and insurers China Life and China Reinsurance announced they would receive a total of Rmb300bn from the Ministry of Finance and Rmb60bn from state tobacco companies. Weak consumer spending and a five-year property slowdown are pressuring bank margins, while low interest rates are affecting insurers' long-term investment prospects.

The move follows a Rmb520bn funding initiative announced last year for the country's biggest state-owned banks. This year's plan was originally expected to cover the remaining two of the six large state-owned banks but has been extended to include insurers and other state-controlled lenders. So-called policy lenders Export-Import Bank of China and Sinosure, which are key institutions for China's importers and exporters, will receive Rmb40bn of the Rmb360bn funding.

State insurance groups China Life, PICC, China Taiping and China Re will receive Rmb60bn, according to official statements. This represented the finance ministry's first large capital boost for the insurance sector in 20 years, analysts said. Cheng Tan, founder of Beijing-based consultancy GMF Research, said the capital injections for the policy banks and state-owned insurers was a surprise, with Beijing broadening the initiative to a "full spectrum" recapitalisation to cover all state-backed financial institutions. "Low interest rates are eating into insurers' profits and weakening their financial buffers," Cheng said. "Second, more capital gives them more leeway to put money into stocks, which fits with the broader push to bring long-term institutional money into the market." Shares in ICBC and Agricultural Bank of China dipped about 2 per cent in Hong Kong on Monday following the announcements, with similar declines for China Life and China Taiping.