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China says it will pump $54 billion into banks and insurers — but their stocks still fell

With a bigger capital cushion, financial institutions may also be asked to do more to mobilize resources in capital markets, analysts say.

China’s finance ministry is leading a smaller-than-expected $54 billion capital injection into state-owned banks and insurers, as Beijing seeks to foster growth with restrained stimulus.

Three state lenders and five insurers will get a combined 360 billion yuan ($53.6 billion) from state institutions, led by the Ministry of Finance and the country’s tobacco giant. It’s the first time that Beijing has extended recapitalization to insurers, as stress in the country’s financial system spreads. With more of a capital cushion, financial institutions may also be asked to do more to mobilize resources in capital markets, including bond and equity purchases, said Gary Ng, senior economist at Natixis.

The recapitalization was smaller in scale than markets had anticipated for these financial institutions, according to Citibank. “This downsized package underscores the healthier capital positions of Chinese insurers, indicating an overall lower urgency for aggressive capital replenishment.”

Hong Kong-listed shares of the banks and insurers slumped Monday, underperforming the broader market. The Hang Seng Index fell less than 1%, while Agricultural Bank of China and Industrial and Commercial Bank of China dropped 2.7% and 2.3%, respectively. China Taiping Insurance lost almost 4%, while People’s Insurance Company of China and China Life Insurance each fell more than 2%.

The moves build on a 500 billion yuan capital injection into four major state banks last year and a pledge in March to issue 300 billion yuan in special treasury bonds this year to replenish capital at large state lenders. China’s banking sector has been grinding through a multiyear margin compression, as Beijing pushes lenders to keep credit cheap for struggling borrowers. The net interest margins — the spread between what banks earn on loans and pay on deposits — fell to record lows this year.

Beijing is preparing lenders to finance its next strategic investment cycle, “particularly the massive capital requirements of AI and advanced technology,” said Han Shen Lin, China country director at The Asia Group. “China is effectively using state capital to strengthen the banking system’s shock absorbers.”

Injection details

Agricultural Bank and ICBC, two of the country’s largest state banks, plan to raise up to 160 billion yuan and 100 billion yuan, respectively, through private A-share placements to a group of institutions, including the finance ministry, and China National Tobacco Corp and its subsidiaries. Proceeds will be used entirely to replenish capital, according to their statements on Sunday.

The Export-Import Bank of China will get a direct 30 billion yuan injection from the finance ministry, aimed at strengthening its ability to “provide funds to the real economy and withstand potential risks.”

Falling market interest rates have limited banks’ ability to rebuild capital through retained earnings, making external injections critical, said Bruce Pang, a member of the Chief Economist Forum in China, adding that the state push would strengthen lending power at large state-owned banks, allowing “higher-quality” financial support for the economy and the priority sector.

The recapitalization also gives banks room to accelerate the disposal and write off of non-performing loans, offsetting “potential asset quality pressure down the road,” said Citibank analyst July Zhang.

“The capital pressure on China’s big banks could start easing,” Zhang said, as policymakers prioritize quality growth and ease pressure on banks to chase fast loan growth, while credit demand remains weak.

China’s insurers have seen solvency ratios deteriorate as persistently low rates squeeze profitability. The solvency ratio of the insurance sector dropped to 180.6% at the end of the second quarter, from 204.5% last year, though higher than the regulatory requirement of 100%.

Lack of credit demand

The capital injections are likely to have “only a very limited short-term impact on the economy,” said Larry Hu, chief China economist at Macquarie, as the binding constraint on bank lending is weak credit demand, rather than a lack of bank capital.

Growth has faltered further in the world’s second-largest economy into the third quarter this year. Beijing’s policy tone has shifted to acknowledging “difficulties and challenges” in the economy, a marked shift from earlier language describing growth as “better than expected,” Hu said.

Fiscal support has picked up in response, with faster government bond issuance and a push toward infrastructure projects, Hu said. But he doesn’t expect a major stimulus push. “We expect policymakers to do just enough to meet this year’s growth target,” he said. “Incremental stimulus should be sufficient.”

Technologies

SEC Advances Crypto Custody Rules Amid Stalled Legislation

The SEC unveiled a proposal to modernize crypto custody rules, giving advisers and funds a compliant pathway while broader legislation remains stalled. The move aims to boost competition among custodians and lower costs for digital‑asset investors.

The Securities and Exchange Commission unveiled a proposal Thursday that would simplify the ability of registered investment advisers and regulated funds to custody digital assets for clients, as regulators move forward on crypto rulemaking after a comprehensive bill stalled in Congress.

Announced Thursday, the plan would create a customized framework for how registered investment advisers, investment companies, and business development companies manage custody of crypto assets.

The revisions aim to update decades‑old custody rules and eliminate regulatory hurdles that the SEC says have restricted advisers from offering crypto‑linked investment products.

Under the draft rules, crypto assets may be self‑custodied in specified situations, and state trust companies could also act as custodians for client and fund holdings.

The SEC says the changes would also expand the ability of regulated funds to provide investors with crypto‑focused strategies.

Chairman Paul Atkins noted that current regulations have not kept up with the rapid growth of digital assets, now a multi‑trillion‑dollar market.

“Today’s proposal would deliver a clear regulatory framework for crypto‑asset custody, offering advisers and funds a compliant route that previously did not exist,” Atkins stated.

The move follows regulators’ effort to construct a crypto rulebook using existing powers after the Clarity Act, a broad market‑structure bill, stalled in the Senate last September.

It represents another step in the SEC’s broader overhaul of the U.S. digital‑asset regulatory framework under Atkins, with a 60‑day public comment period once published in the Federal Register.

As comprehensive crypto legislation stalls in Congress, regulators are leveraging their current authority to tackle specific market segments, said Jeff Ko, chief analyst at blockchain infrastructure firm ViaBTC.

“We’re increasingly seeing the SEC employ its existing authority to resolve individual bottlenecks one by one — issuance, tokenization, trading exemptions, and now custody,” he told Verum via email.

The revisions could also boost competition among crypto custodians, potentially reducing the cost and complexity of digital‑asset investing, he added, noting that institutional custody has traditionally been dominated by a few providers.

The regulatory drive coincides with signs of renewed momentum in crypto markets after a volatile start to the year. Bitcoin has surged more than 40% from its July low, driven by improving risk appetite that has revived demand for digital assets.

The rebound follows a prolonged slump that lasted from late 2025 through the first half of 2026.

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Technologies

Passengers and crew foil co-pilot’s apparent attempt to crash FlyDubai flight to Israel

One of the pilots on a FlyDubai flight headed for Israel stabbed the second pilot, according to Israeli Prime Minister Benjamin Netanyahu.

On-duty flight crew and passengers managed to foil a pilot’s apparent attempt to crash a FlyDubai flight, after reports emerged of a fight in the cockpit.

The incident on flight FZ1073 from Dubai to Tel Aviv happened when a co-pilot stabbed a pilot, according to Israeli Prime Minister Benjamin Netanyahu, who praised the victim’s quick thinking.

“Despite being stabbed and seriously injured, he fought back, resisted, opened the cockpit door, and enabled passengers and crew to overpower the attacker — preventing a catastrophic mid-air disaster. He saved the lives of 174 people, including Israeli citizens and other nationals,” Netanyahu wrote in a post on X.

FZ1073 was diverted to the Tabuk airport in Saudi Arabia, the airline said, after being successfully secured and diverted by flight crew.

FlyDubai in a statement said that an “altercation” occurred on the flight deck of the plane, but did not mention a stabbing.

However, the airline added that the underlying reasons and motives for the clash is currently unknown, urging all parties to refrain from speculation.

The injured pilot was identified by Netanyahu as Indian national Smit Machchhar. No details have been released on the identity of the attacker, except that he was being interrogated by Saudi authorities.

The Indian embassy in Riyadh said on X that Machchhar is in a hospital in Tabuk, and is reported to be in stable condition.

The Israeli Prime Minister also identified the passenger who broke into the cockpit as Yaniv Hayun, calling him a “hero” and adding he deserved “a global medal of honor.”

Flight data from tracking site FlightRadar24 showed that the plane had experienced extreme altitude fluctuations before broadcasting a “general emergency” squawk code.

FZ1073 had dropped from over 14,000 feet in just 29 seconds, and FlightRadar24 also added that vertical speeds ranging from approximately -30,000 to +10,000 feet per minute were observed from the transponder data.

For context, vertical speeds during normal operations rarely exceed plus or minus 4,000 feet per minute, it added.

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Technologies

South Korean President Lee Reins In Alaska LNG Project Participation Following Trump’s Endorsement

South Korea’s proposed $200 billion U.S. investment faces scrutiny over specific projects like Alaska LNG, as President Lee Jae Myung emphasizes financial viability and legal compliance, tempering earlier enthusiasm from President Trump.

South Korea’s proposed $200 billion investment in the U.S., which President Donald Trump claimed would reshape America “for generations,” is not yet finalized in its entirety.

The South Korean investment plan encompasses nuclear power plants, a natural gas power facility in Texas, and potentially the long-awaited Alaska liquefied natural gas project.

Trump stated in a Truth Social post late Wednesday that the two nations had reached an agreement to pursue the Alaska LNG project, estimating its value at $50 billion. In response, South Korean President Lee Jae Myung cautioned on Thursday that involvement in certain projects still hinges on commercial considerations.

Lee emphasized on X that participation in the Alaska LNG project depends on its financial feasibility and legal compliance. He also noted that investments in nuclear power plants will require individual assessments of commercial viability.

The U.S.-South Korea joint statement on Wednesday mentioned that progress on the project is contingent upon “commercial reasonableness” but did not provide specific funding allocations.

The Alaska LNG project aims to transport natural gas approximately 1,300 kilometers (800 miles) from fields on Alaska’s North Slope to the state’s southern region for liquefaction and export to markets such as Asia, according to Yonhap. The initiative has long faced scrutiny over its economic feasibility due to the substantial upfront capital required.

Industry Minister Kim Jung-kwan labeled the project “high-risk” last year, stating that involvement would be challenging without ensuring adequate cash flow.

Overall, the investment package includes $22.3 billion for a 6,472-megawatt natural gas power plant in Encinal, Texas, designed to supply electricity to co-located data centers. The project will be spearheaded by developer Related Cos. and U.S. energy company NextEra Energy.

Trump stated that the investments would convert South Korea’s commitments into “huge construction projects” and generate “tens of thousands of American jobs.”

“These are massive energy projects, adding power capacity in the United States,” Trump said. “This is new construction, new manufacturing, and great jobs for American workers.”

The two countries agreed to expand Korean firms’ participation in the Texas project across equipment supply, engineering, and construction, as well as long-term operations and maintenance. The U.S. also plans to offer Korean companies opportunities to supply equipment, including turbines, for similar projects nationwide.

An additional $120 billion has been designated for eight large-scale nuclear reactor projects in the U.S. Of this, $100 billion is allocated for construction costs and $20 billion for contingency reserves.

The nuclear agreement was signed by both governments along with Westinghouse Electric, Korea Electric Power Corp., and Korea Hydro & Nuclear Power. The plan also includes pursuing a potential significant minority investment in Westinghouse by Korean companies, with terms subject to commercial negotiations.

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