Chinese banking troubles?

[marmar]

By Craig Stephen


HONG KONG (MarketWatch) — It is hard to shake off the continued speculation about the health of mainland Chinese banks, as each week new details surface about problem loans. Many have feared that listed banks carrying out massive state-directed policy lending in the aftermath of the financial crisis was always going to be a recipe for some similarly oversized bad loans.

Last week, these fears resurfaced after rating agency Fitch warned that China may see its local-currency rating downgraded in the next two years if problems in the banking system pan out as they expect. See report on Fitch’s China rating warning.

This might appear a harsh judgment, going by recent bumper first-half results for mainland China’s banks. But what is causing concern is finding some clarity on the maze of potentially problematic loans made by state-owned banks to state-owned companies and municipal authorities. Will shareholders ultimately have to pick up tab?

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Last week, a report by Caxin Online revealed the worrying statistic that the northeastern province of Liaoning defaulted on about 85% of debt service payments last year, citing a government audit. ..............(more)

The complete piece is at: http://www.marketwatch.com/story/chinas-capital-hungry-banks-2011-09-11