The International Monetary Fund warned yesterday that Chinese banks face increasing risks that could hamper growth, adding to concerns about the second largest economy in the world amid the debt crisis in Europe.Add to warnings from industry analysts that state banks of a possible increase in defaults and other problems after a lending boom that has helped China recover quickly from the global crisis of 2008.
The Chinese economy grew by 9.1 percent for the quarter ending in September, but growth should slow as exports weakened due to a decline in U.S. and European demand and a boom in house prices cooler .
"Despite the ongoing reform and financial strength, China faces a stable structure of financial sector vulnerabilities," the IMF said.
Chinese banks is seen as one of the strongest since they avoid the credit problems, which are beaten with Western institutions. But analysts say they face a possible increase in suffering, because of heavy borrowing during the crisis.
Chinese banks could face risks if property prices fall or rise in outstanding loans to loans related to the crisis, the IMF said.
He said other hazards that may result from the increasing imbalance in China's economy is heavily dependent on exports and investment to stimulate growth, despite government efforts to increase domestic consumption.
Inflexible regulatory system and the government dominant in determining who gets loans "could reduce the need for reorientation of the financial system to support the future growth of China," said
