Reuters | Tue Jun 15, 2010 | 11:51am IST
The global economic recovery is likely to be "slow and tortuous" and China faces risks from a multitude of factors including trade protectionism and bad real estate loans, China’s Banking Regulatory Commission (CBRC) said on Tuesday. "The chances in 2010 of some credit assets forming into substantive risks and losses has increased," the CBRC said in its annual report, published on its website on Tuesday.
Among the risks faced by Chinese banks, it identified quite large risks from "unwise lending" to local government investment units, as well as the sovereign debt crisis and U.S. dollar exchange rates. It said some banks were lending large amounts to local governments units, noting "risk management has been inadequate, and there are quite large latent risks in lending to local investment vehicles." CBRC’s chairman, Liu Mingkang, has repeatedly said the regulator will strictly control the speed of lending and is paying special attention to lending risks in the property sector. The government has also warned of the dangers of China’s red-hot property market, which it has described as one of the country’s most pressing economic problems, and has tried to get banks to rein in property lending.
CBRC’s annual report also warned of risks from "imprudent behaviour" in personal housing loans in 2010. "The risks from a chain reaction in lending for real estate development may warrant attention, and latent credit risks may be increasing," said the report. Last week, China reported that the year-on-year pace of bank lending and money supply growth slowed in May and new local currency-denominated loans extended in May fell to 639 billion yuan from 774 billion yuan in April.