Chinese local governments to be allowed to replenish small banks’ capital with 200 billion yuan government bonds

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China's capital-starved small banks are expected to get replenishment from local governments as the world's second largest economy tries to defuse bad-debt risks and strengthen small banks' ability to serve the real economy.

Chinese authority plans to allow local governments to use up to 200 billion yuan funds from special-purpose bond sales to replenish some small and midsize banks' capital, a person in the banking sector told Yuan Talks.

The news was also reported by Chinese local business newspaper The 21st Century Business Herald which citied government sources.