Regulator:Chinese banks face lower profits

BEIJING, Nov. 17 (UPI) -- Shrinking profits and rising bad loans are risks Chinese banks face in the current global financial environment, says the country's senior banking regulator.

Jiang Dingzhi, vice chairman of the China Banking Regulatory Commission, told a financial forum in Beijing while being healthy at present, such risks are ahead for the country's banking system, China Daily reported.

"The financial crisis won't end in the near term. So we should not turn a blind eye to the risks," Jiang said.

He said bad loans especially in the real estate sector are a major risk for Chinese banks face as mortgage defaults rise.

Losses from overseas investments also threaten Chinese banks.

He said there is also the risk to China from "exported inflation" in the future. He warned that banks in several developed economies, which have pumped huge liquidity pumped and credit into their financial systems, may start exporting capital to developing countries like China through loans and direct investment.

"That may cause high inflation (for China) and we should keep a close eye on cross-border capital flows," said Jiang.

Chinese banks' combined assets totaled $8.7 trillion, at the end of September, five times the level 10 years ago, Jiang said. He said the banks have reduced their average bad-loan ratio to 5.49 percent at the end of September from 6.3 percent in March.