Take note that it was said behind closed doors. Keeping up on bad and doubtful loan ratios on the mainland is still an inexact business. The bigger banks give you figures, but for the overall system you get it only in a snippet here and a snippet there, some of it in the pssst-don't-tell-anyone form.

I can tell you that six years ago the central bank governor said that 25.37 per cent of the loans at the four biggest state-owned commercial banks were non-performing, which makes 6.2 per cent last year look very good. Things seem to have improved dramatically.

But stop and think about this. Banks do not keep non-performing loans on their books forever. If borrowers still cannot make interest payments after a stipulated period, then lenders write these loans off or, as has too often happened on the mainland, saddle the central government with them.

I do not know what the average period on the mainland is between first classifying a loan as non-performing and finally writing it off, but it is definitely a good deal shorter than six years.

The 6.2 per cent non-performing ratio last year must therefore represent relatively fresh lending that has gone sour rather than the rump of old loans that are still not being serviced.

And this I certainly find difficult to understand. How can the financial system of an economy that has registered double-digit annual growth rates for the past six years have any non-performing loans?

You may say that there are always a few borrowers in any system who cannot repay their borrowings but they must be precious few in an economy that has expanded by 80 per cent in real terms in just six years. If not, their bankers must be spectacularly incompetent.

Bear in mind that we are not talking about anything small here any longer. Total financial system loans on the mainland now stand at 27.2 trillion yuan (HK$30.1 trillion), which is about 10 per cent greater than the size of the economy and growing easily as fast as the economy.

Let us put it in perspective. The bottom line in the chart shows you that Hong Kong dollar loans classified as doubtful never exceeded 5.5 per cent of total financial system lending in Hong Kong, even during the worst of the aftermath of the 1997 Asian financial crisis. The latest figure is 0.44 per cent. That is what you call a tight, well-run banking system.

For an example of the other sort, look at the top line in the chart. Thailand's non-performing loan ratio was 47 per cent at its worst.

I would like to be able to tell you what it was a year before the crisis but the earliest figures I could find were for June 1997, only days before the crisis broke. I am reasonably certain, however, that the ratio was no higher than 6 per cent in early 1996.

You may tell me, of course, that I cannot really compare the mainland's financial system at present to Thailand's in 1996. They are different. The mainland's is bigger, it is more inured to external events and reforms are being made at a faster pace than they ever were in Thailand.

Perhaps, but I am not sure.

The mainland's financial system still does not have the advantage of market pricing, is still heavily state-directed and is no longer really inured to external events. Global financial turmoil could set things back severely.

Most of all, there is that non-performing loan ratio of 6.2 per cent.

You just have to ask the question. If this is what it was during the best possible times for financiers, what might it be during bad times?

I wonder if Mr Liu has ever asked himself this question. I certainly hope that he has.