CHINA'S legal system cannot protect foreign banks from defaulting debtors, says the chief executive of the Bank of East Asia. In a generally bullish speech on the risk of lending to enterprises in China, David Li Kwok-po said yesterday the mainland's legal framework was insufficient and inefficient from a creditor's perspective. 'Lending in China is complicated not only by the country's changing regulatory environment but by existing practices,' he said. Stressing that the track record of the bank's mainland customers had been good, Mr Li admitted there were difficulties for foreign banks in recovering 100 per cent of the principal when a borrower had financial difficulties. '[In case of defaulted loans] lenders in China usually are not prepared to pay the interest, only the principal,' he said. 'In case the party brings the case to court, the chance of getting it back is good. But the time and the cost involved may be large . . . so one has to concentrate more on the party concerned.' Mr Li said his bank, unlike most foreign and domestic banks, still accepted mainland real estate as collateral under cautious requirements. There were other concerns, too. He said China needed to exercise more restraint to improve its debt repayment capabilities, although its risk profile had continued to improve. China saved about 30 per cent of its gross national product, he said, which amounted to bank deposits of about $250 billion and a further $50 billion tucked under mattresses.