China Banks to Suffer from Export, Housing Slump

China's weakening exports and deepening real estate market downturn will eventually hurt its banks, a senior regulator said in remarks published on Monday.

CNBC.com

Yan Qingming, Shanghai bureau head of the China Banking Regulatory Commission, told the Financial News that it usually took 6-12 months for slowing export growth to be reflected in corporate earnings and a further six months before banks saw a deterioration in their loan portfolios.

Major Chinese banks have already started to report slower profit growth. For example, Bank of China, said last week its profits rose 12 percent in the third quarter, down from 43 percent growth in the first half.

Yan also said banks would face big challenges if a downturn in the property market intensified.

China's real estate market has been faltering since late last year and prices in some cities like Shenzhen have fallen more than 40 percent.

In Shanghai, loans to developers dropped 2.9 billion yuan ($424 million) in the third quarter, compared with increases of 4.6 billion yuan in the second quarter and 10 billion yuan in the first quarter, statistics from Yan's bureau showed.

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However, outstanding non-performing loans to the real estate sector in the city fell to 4.6 billion yuan by the end of September from 5.1 billion at the start of the year, according to the figures, which were reported by the Financial News.

Dai Genyou, a senior official at the People's Bank of China, said China's property market problems were more complicated than those of the stock market, which has shed more than 70 percent from its peak in October 2007.

Dai said demand for housing would not revive strongly until prices fell to 2006 levels.

Copyright 2008 Reuters. Click for restrictions.