Here's why analysts are concerned at Singapore banks' rapid expansion into China

The banks’ exposure to the country has risen to 22.5%.

Singapore’s big three banks, DBS, OCBC, and UOB, are diving directly into the China and its economic slowdown, where it has expanded most aggressively over the past seven years.

According to a report by BMI, the total exposure of the big three to Greater China as a share of their overall loan portfolio has risen to 22.5% in March 2016, from just around 15% at the end of 2009.

BMI added that Singapore banks are not only exposed to the Chinese market through its direct loan exposure but also through their equity stakes in middle-tier and small banks.

“For example, UOB has a 15.0% stake in Evergrowing Bank Co., Ltd, which was involved in the first publicly reported case of a shadow loan default in September 2014. This is also one of the JSBs that we are particularly concerned about as it has significant exposure to opaque investment receivables,” BMI Research said.

Additionally, OCBC also holds a 20.0% stake in Bank of Ningbo.

“Like other CCBs, the capital adequacy of Bank of Ningbo is not particularly strong, standing at 10.1% at end-2015, and it is vulnerable to China's broader economic slowdown, despite having a smaller shadow loan portfolio,” BMI said.

“This will compound the woes of Singaporean banks which are already grappling with city-state's weak residential property market,” the report added.