As patient capital supporting the real economy, bank-backed AICs are shifting from traditional debt-to-equity swaps toward equity investments in tech and innovation firms, drawing increasing attention from policymakers and markets.
Photo from Jiemian News
by AN Zhen
China's line-up of bank-backed financial asset investment companies (AICs) is expanding again, with China CITIC Bank and China Merchants Bank securing regulatory approval to launch their wholly owned units.
China CITIC Bank said in a filing on November 23 that CITIC Financial Asset Investment Co. (Xinyin Investment) received its opening approval from the National Financial Regulatory Administration (NFRA) on November 21. China Merchants Bank reported the same day that its AIC subsidiary, CMB Financial Asset Investment Co. (Zhaoyin Investment), had also been cleared to begin operations.
The approvals follow a policy move in March, when the NFRA widened the pilot program allowing banks to conduct equity investment through AICs. The reform has accelerated the build-out of these vehicles, which now number nine. Positioned as long-term "patient capital," AICs are extending beyond their original mission of market-based debt-to-equity swaps into equity investments in strategically important tech enterprises.
Xinyin Investment is registered in Guangzhou with 10 billion yuan in capital, while Zhaoyin Investment is registered in Shenzhen with 15 billion yuan.
Since March, when the NFRA permitted eligible commercial banks to set up AICs, four lenders—including Postal Savings Bank of China, China Merchants Bank, China CITIC Bank and Industrial Bank—have announced plans to create such entities. Three joint-stock banks have now obtained opening approval, including Industrial Bank's Xingyin Investment, which recently held its inauguration ceremony in Fuzhou.
Unlike most lenders that locate investment arms in the same city as their headquarters, CITIC's AIC has chosen Guangzhou. A state-owned bank AIC executive told Jiemian News that the arrangement is unusual but not unprecedented—ICBC's AIC, for example, is based in Nanjing. He said AICs often gravitate toward "innovation hubs" where local governments provide co-investment, project sourcing and operational support. Guangzhou is expected to offer similar backing.
The country's first AICs were formed in 2017, when the five biggest state-owned lenders—ICBC, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications—received approval to establish investment companies focused on debt-to-equity swaps and corporate deleveraging. Initial registered capital ranged from 10 billion to 12 billion yuan.
Most have since increased their capital bases. CCB and ICBC have expanded their AICs to 27 billion yuan; ABC and BOC have raised theirs to 20 billion yuan and 14.5 billion yuan respectively. Bank of Communications lifted its AIC's capital to 15 billion yuan in 2023.
After the NFRA's policy shift this year, more lenders moved quickly. Industrial Bank was the first joint-stock lender to receive approval in May, followed by Postal Savings Bank and now CMB and CITIC. Together, the nine bank-backed AICs now have a combined registered capital of 158.5 billion yuan.
"This new structure allows joint-stock banks to make better use of their agility and market sensitivity," said LOU Feipeng, a researcher at Postal Savings Bank of China, in comments to Jiemian News.
With three joint-stock banks now approved, investors are watching to see whether more banks will join the scheme.
A manager at a state-owned bank AIC said additional joint-stock banks could still apply, though the 10-billion-yuan capital requirement—funded entirely by the bank—remains a significant hurdle. Even with a regulatory exemption that lowers risk-weighting for AIC equity investments, capital consumption is still a constraint for smaller lenders.
A senior executive at another joint-stock bank said the issue had been discussed internally but had not advanced. Executives at several leading city commercial banks said they had no such plans, adding that their priority remains core lending activities that support local economies.
Talent is another limiting factor. "Finding the right people is even harder than finding the right projects," a state-owned AIC manager said. AICs typically draw from investment banking, risk and legal teams, while some banks also consider hiring from market-based investment institutions.
Despite expanding mandates, debt-to-equity swaps still dominate the business model. Another state-owned bank executive said his company manages around 100 billion yuan in assets, with pure equity investments accounting for about 10%. Investment restrictions remain tight: targets must have strong tech-innovation attributes, be located within designated pilot regions, and AICs cannot hold more than 30% equity—often requiring provincial and municipal capital to co-invest.
At Xingyin Investment's inauguration on November 16, chairman CHEN Wei said the firm would "focus on its debt-to-equity swap mandate," while supporting the upgrading of traditional industries and the growth of emerging and future sectors.
Industry insiders say that as more banks set up AICs, funding sources for tech and strategic emerging industries will become more diversified. "Over time, we will see broader participation—from banks, government guidance funds, industrial investors and the national social security fund," one executive said.
