Caution on Chinese banks spreading to Asian counterparts

A contagion of worry looms over Asia-Pacific as weakened Chinese banks threaten to trigger a domino fall effect.

According Fitch, China is mired in a growing credit and funding crisis, which will likely hurt its neighboring banks in the region.

Mark Young, Head of Asia-Pacific Financial Institutions, said, "Fitch is becoming more cautious about the outlook of Asian banks due to early warning signs of asset deterioration in key financial systems across Asia. It is important to monitor any spillover effects from China's slowdown and problems with Chinese banks. However, non-performing loan ratios for key banks of most of emerging Asia are near historical lows and the loss absorption features, except those in China, remain robust."

Charlene Chu, Head of China Financial Institutions, said, "Chinese banks are contending with a growing list of challenges, including the aftermath of an unprecedented credit boom, weakening economic growth, and accelerating financial liberalisation. These will increasingly weigh on Chinese banks' profits and capitalisation. The next couple of years are likely to be difficult. If slowing economic growth leads to significant asset quality deterioration, government support could be required for some banks."