Credit quality in China is generally satisfactory despite potential defaults on certain financial products and a recent scandal involving Qingdao Port International Co. Ltd. (06198.HK), the Hong Kong Economic Journal reported Wednesday.
Qingdao Port, a major terminal for iron ore, was recently found to have repeatedly pledged certain commodities to obtain loans, raising concern about the credit quality of banks exposed to the debt.
This was exacerbated by signs of potential defaults on certain financial products, the report said.
However, the Qingdao scandal was an isolated incident and should not put the banking system at risk, according to Paul McSheaffrey, a partner at KPMG China and head of banking in Hong Kong.
He expects lenders to tighten due diligence, especially with regard to securities used as collateral for loans.
About HK$1.85 trillion (US$238.67 million) of loans had been extended by Hong Kong-registered lenders through their mainland non-bank units at the end of last year, up 31 percent from 2012.
The loans represented 14 percent of the total assets in the banking system compared with 12 percent in 2012.
McSheaffrey said the proportion of those loans will continue to grow by 1 to 2 percentage points a year.
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