China Construction Bank to issue preference shares

China Construction Bank (CCB), one of four major banks in China, on Saturday announced it plans to sell no more than 600 million preference shares to raise up to 60 billion yuan ($9.8 billion) in a private placement.

The issuance is targeted at qualified domestic investors, and the plan will be subject to approval from the China Banking Regulatory Commission and China Securities Regulatory Commission (CSRC), according to the bank's filing to the Shanghai Stock Exchange.

The plan aims to boost the bank's tier-one capital, improve its capital quality, and sustain healthy business development, said the CCB.

To help banks meet new global capital rules known as Basel III, the CSRC announced new rules in March of this year for a pilot program allowing eligible companies to issue preference shares.

Preference shares, along with common shares, are two primary types of stocks that companies offer to investors. Preference shareholders have priority rights over ordinary shareholders in distribution of profits and residual assets.

Unlike common shares, preference shares function more like a bond. They are rated by major credit-rating companies and their prices are affected by changes in interest rates.