The renminbi’s surprising depreciation in the past week has highlighted concern about a sharp increase in lending into China by Hong Kong banks, the Wall Street Journal reported Thursday. The growth in cross-border loans means Hong Kong’s banks would be vulnerable if there is a sharp slowdown in China’s economy, a scenario that could fuel a spike in bad loans, the paper said. “The need for Hong Kong banks to maintain their stringent prudential management of their mainland exposure cannot be overemphasized,” the Hong Kong Monetary Authority was quoted as saying. Foreign-currency lending by banks in Hong Kong rose to a record HK$2.9 trillion (US$368 billion) by the end of 2013, with most of the lending to Chinese firms, according to the report.
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