The Bailout Continues

China on Monday announced a $20 billion capital injection into China Development Bank, one of the country's three policy lenders, as part of a long-planned transformation of the state-owned company into a commercial bank.

The move is likely to result in a multi-billion dollar stock market listing of the bank, aimed at raising cash, sharpen its competitive edge, and aid its overseas expansion following its 2.2 billion euro ($3.2 billion) investment in British lender Barclays in July.

"The capital injection extends the reform pattern of other state banks. It also means that restructuring of CDB will speed up toward commercial operations," said Yin Jianfeng of Finance Research Institute at the Chinese Academy of Social Science.

Tells you a bit about the solvency of Chinese banks. Who in their right mind would invest in a bank that just required a $20 billion capital injection if they weren't going to get control over the bank after the investment. Chinese state-owned (or close to owned) companies don't change easily. They fight till the death because the culture is not about fiscal responsibility and profits.

These banks were designed to do two things: employ people and lend money to state owned industries. If ya think they're suddenly going to develop management skills because the government handed them a $20 billion check, you're wrong. And this isn't the first large capital injection these banks have had.