£187bn China loans threat to British banks

BRITISh banks could be the most vulnerable to an economic meltdown in China, according to Bank for International Settlements data.

UK lenders are the largest creditors to China, the Baslebased group found, with around £187bn of loans tied up in the country at the end of June – up by more than 20pc since the end of 2019.

The numbers are likely to worry analysts and the Bank of england amid fears of a debt crisis in China. Concerns about the financial strength of property giant evergrande, which is struggling under crippling debts of £220bn, have sent shockwaves through China’s property sector.

Two of the biggest international banks in China, hSBC and Standard Chartered, are British and listed in london.

The global financial system has become increasingly exposed to Beijing as its growth has exploded.

China’s rebound from the pandemic was swifter than in the West. Covid first emerged in the city of Wuhan, which went into lockdown in January 2020. But China’s recovery has stuttered recently, with weaker GDP growth and faster inflation than many expected.

The spotlight has been on the country’s embattled property developers for several weeks after debt-stricken evergrande Real estate began teetering on the brink of collapse. Concerns have been mounting that if evergrande, which owns properties in 280 cities, fails it could drag the property market with it.

By mid-2021, international banks had around £705bn in exposure to China, the Bank for International Settlements said. The UK could have an additional £29bn tied up in China, mostly through other debt deals.

The US had around £101bn by the end of June, while Japan had £72bn.