China's third-largest state owned bank, the Agricultural Bank of China, which operates predominately in the countryside, has received a cash injection of $19 billion from Central Huijin Investment Co, an investment arm of China Investment Corporation - the country's sovereign wealth fund, after the bank reported 817.97 billion yuan in non-performing loans at the end of 2007 which was lent at the behest of the government.

With this cash infusion, Central Huijin Investment Co will own 50 per cent of Agricultural Bank, while the ministry of finance will own the rest.
As one of the big four among China's state-owned commercial banks, Agricultural Bank of China (ABC) is an important component of China's financial system, with its head office in Beijing.

The bank plans to raise an additional $10 billion by selling subordinated bonds and later make a public offering in the second half of 2009 on the lines of the other three state-owned big Chinese banks, Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd.

China had undertaken to reorganise its banking industry by making banks into wholly commercial enterprises, which  has, till now, cost the government nearly $500 billion,  and the $19 billion cash infusion into the Agricultural Bank is part of the restructuring plan.

The bank said in a statement, "The capital injection marks an important step in the bank's joint-stock reforms and it is a substantive move towards the financial restructuring."

Central Huijin Investment Co said in a statement "The injection of US dollars equivalent to 130 billion yuan will effectively boost the bank's capital base, improve its financial status and enhance the bank's profitability.

The bailout of the Agricultural Bank will cost more to the Chinese government as the bank which has 24,000 outlets nationwide operates mainly in the country's rural areas which has approx 800 million farmers, is saddled with massive bad loans given to the farmers and rural businesses at the behest of the communist party.

Its bad debt loans to rural areas and the agricultural sector is about $203.7 billion as of September.

Although China is reorganising its banks, it still wants the Agricultural Bank to help the farmers and agriculture industry and the bank will continue with its expansion plans in the rural areas.