By staff reporter Cao Zhen

(Caijing.com.cn) Bank of China Ltd. (SH 601988; HK 3988) said it won approval from the China Securities Regulatory Commission and the central bank to issue 40 billion yuan worth of subordinated bonds.

The bank did not elaborate in its statement filed with the Shanghai Stock Exchange on June 29.

On March 23, the bank's shareholders approved a proposal to issue up to 120 billion yuan worth of subordinated bonds.

China's largest state-owned commercial banks are gearing up to boost their capital following a spike in new loans in early 2009, as the government sought to restore confidence in the economy.

Chinese banks issued around 5.8 trillion yuan in new loans over the first five months, and lending in June is expected to rebound to 1.2 trillion after decelerating to 591.8 billion in April and 664.5 billion in May.

The official China Securities Journal reported that the June credit rebound is mainly due to rising mortgage lending and demand from the private sector, in addition to financing for projects under the government's 4-trillion-yuan stimulus package.

The China Banking Regulatory Commission required the banking sector earlier this month to ensure that bank credit enters the real economy and does not flow into unauthorized investments in the stock and property markets.

Industrial and Commercial Bank of China plans to issue up to 100 billion yuan in subordinated bonds by 2011. Bank of Communications, China's fifth-largest bank, is also planning subordinated bond issues totaling up to 80 billion yuan over the same period.

1 yuan = 14 US cents

Full article in Chinese: http://www.caijing.com.cn/2009-06-29/110190898.html