Analysts Warn of Risks Threatening China’s Banks
By DAVID BARBOZA, TNYT
SHANGHAI — A week after the Agricultural Bank of China raised nearly $20 billion from global investors in one of the biggest stock offerings in history, analysts are warning about growing risks to China’s banking system.
A report released on Wednesday by Fitch, the credit ratings agency, said Chinese banks were increasingly engaging in complex transactions that hid the size and nature of their lending, obscuring hundreds of billions of dollars in loans and possibly even masking a coming wave of bad real estate and infrastructure loans.
The report also said that Chinese regulators significantly understated loan growth in the first half of the year, by 28 percent, or about $190 billion, and that many banks continued to secretly shift loans off the books, resulting in a “pervasive understatement of credit growth and credit exposure.”
“The growing amount of credit moving out of the banking system through these channels is one of the most disconcerting trends we’ve seen in China in recent years,” Charlene Chu, a Beijing-based banking analyst at Fitch, said of the practice of repackaging loans and moving them off bank balance sheets.
While China’s economy remains robust, the report is troubling because the country’s recovery has been fueled by aggressive lending and soaring property prices. Lending by state-