Foreign banks' China exposure to rebound from 2015 trough

Mainland China exposure of foreign banks rose 3.7% to USD1,642b in 2016.

Foreign banks' exposure to China continues to rebound from its 2015 trough, driven by a pick-up in trade and improving sentiment towards the Chinese economy, among several other factors.

Fitch Ratings expects a further rise in lending to the mainland in 2017, with tight onshore liquidity conditions likely to add to the incentives for Chinese companies to borrow offshore. Hong Kong banks have already reported a 10% qoq rise in Mainland China exposure (MCE) in 1Q17, compared with growth of just 6% over the whole of 2016.

Here's more from Fitch:

Total MCE of foreign banks rose by 3.7% in 2016 to USD1,642 billion, after falling by 14% in 2015, according to data compiled by Fitch. Growth in the second half of 2016 slowed slightly, to 1.2% from 3.7% in 1H16. Hong Kong banks account for the largest share of foreign banks' MCE, at 48.9% at end-December, followed by Singapore at 7% and the UK at 6%. The UK's share would be 17% if it included the MCE of UK banks' Hong Kong subsidiaries.

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