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Thursday 4 February 2010
“Big bubble risk”
Fitch Ratings warned on Wednesday that banks in China face the greatest ‘bubble risk’ of any Asian country, one day after it downgraded two mid-sized Chinese banks due to the rising threat of bad credit.
SHANGHAI - Fitch Ratings warned on Wednesday that banks in China face the greatest ‘bubble risk’ of any Asian country, one day after it downgraded two mid-sized Chinese banks due to the rising threat of bad credit.
The agency’s comments in an Asia-wide assessment of the banking sector come as concerns mount that Chinese banks may be headed for trouble over bad debt after a record lending spree last year.
‘The agency views ‘bubble risk’ as greatest for Chinese banks given their 32 per cent loan growth in 2009; this looks likely to be followed by a further 20 per cent in 2010,’ Fitch said in a statement.
‘Credit growth of more than 50 per cent over a two-year period in an economy where bank credit is already quite large relative to gross domestic product almost inevitably involves some misallocation of credit,’ it added.
New loans extended by China’s banks nearly doubled in 2009 from the previous year to 9.6 trillion yuan (S$1.96 trillion) as banks heeded Beijing’s calls to pump up lending to keep the economy growing. Fitch however noted the limited transparency of Chinese banks and said their tendency to reschedule loans meant any bad debt problems would surface slowly.
‘Chinese banks are less well-placed, compared with Asian peers, to deal with potential problems given that rapid loan growth is weakening capital ratios that are already relatively low,’ Fitch said. -- AFP
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“Big bubble risk”
03 February 2010
SHANGHAI - Fitch Ratings warned on Wednesday that banks in China face the greatest ‘bubble risk’ of any Asian country, one day after it downgraded two mid-sized Chinese banks due to the rising threat of bad credit.
The agency’s comments in an Asia-wide assessment of the banking sector come as concerns mount that Chinese banks may be headed for trouble over bad debt after a record lending spree last year.
‘The agency views ‘bubble risk’ as greatest for Chinese banks given their 32 per cent loan growth in 2009; this looks likely to be followed by a further 20 per cent in 2010,’ Fitch said in a statement.
‘Credit growth of more than 50 per cent over a two-year period in an economy where bank credit is already quite large relative to gross domestic product almost inevitably involves some misallocation of credit,’ it added.
New loans extended by China’s banks nearly doubled in 2009 from the previous year to 9.6 trillion yuan (S$1.96 trillion) as banks heeded Beijing’s calls to pump up lending to keep the economy growing. Fitch however noted the limited transparency of Chinese banks and said their tendency to reschedule loans meant any bad debt problems would surface slowly.
‘Chinese banks are less well-placed, compared with Asian peers, to deal with potential problems given that rapid loan growth is weakening capital ratios that are already relatively low,’ Fitch said. -- AFP
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