Hong Kong banks stand to benefit from a recapitalisation of the mainland financial sector to clean up its non-performing loan (NPL) problem, according to Credit Agricole Indosuez. Economist Sebastien Barbe said yesterday opportunities would arise for SAR banks to advise mainland authorities on clearing the NPLs. 'I think the reforms in the banking system in China will be a difficult task to negotiate - it won't be done overnight,' he said. 'That's why I think Hong Kong can benefit from its status of a clean and free marketplace. As the reforms are going to be complex in China, certain banks in the services sector will be asked for advice.' Official estimates put NPLs at about 30 per cent of outstanding loans on mainland banks' balance sheets. This is in addition to NPLs placed with asset management companies. Mr Barbe said it was unlikely that the Hong Kong dollar would be pegged to the yuan in the next five years, as the SAR and the mainland had very different capital account policies. The bank also forecast Asian credit spreads would tighten again this year. This would be driven by continuing strong economic performance and further upgrades in sovereign ratings.