Hong Kong banks face higher risks on mainland lending as China’s economy slows, property woes deepen, Moody’s says
- Moody’s Investors Service warns slowdown in Chinese economy could weigh on loan portfolios of some banks in Hong Kong
- Property sector’s financial difficulties remain a concern as real estate loans account for up to 35 per cent of Hong Kong banks’ mainland lending
A slowdown will be particularly acute for lenders in Hong Kong, with lending in the mainland accounting for as much as 35 per cent of some banks’ loan portfolios, according to the credit rating agency.
“The impaired loan ratios for Hong Kong banks’ mainland loans will likely further rise this year in light of China’s economic slowdown, after increasing more abruptly than overall loan exposures over the six months to March 2022,” Helen Zhang, a Moody’s analyst said.
China’s economy grew 4.8 per cent in the first quarter, well below the government’s full-year gross domestic product growth target of 5.5 per cent as the nation continues to pursue a “zero Covid” policy to try to control the spread of Covid-19.
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Last month, the World Bank cut its full-year forecast for China’s economic growth to 4.3 per cent, from 5.1 per cent in December.
Beijing is expected to release its second-quarter figures on Friday in a closely watched report on the health of the world’s second biggest economy, one that could be a test of its zero-Covid goals. The first-quarter figures included lockdowns in some cities, but not the effects of a two-month lockdown in Shanghai that began in April.
