Chinese bank halts Abu Dhabi loan as creditors cut Middle East risk

[BEIJING] Several Chinese financial firms are scaling back exposure to Middle Eastern debt, while regulators are stepping up oversight as the conflict raises concerns over the nation’s extensive lending in the region.

One major bank took a rare step in restricting a drawdown on a bilateral loan to one of the Abu Dhabi government’s financial entities, a person familiar with the matter said. A mid-sized lender is seeking buyers to offload portions of syndicated facilities for Middle Eastern borrowers, including sovereign wealth fund ADQ’s US$4 billion deal from last year, another person said, asking not to be identified discussing private matters.

A Chinese insurer’s asset management arm is reducing holdings of sovereign and state-linked bonds, including those issued by Saudi Aramco, one person said. Meanwhile, traders at a Chinese institution have been instructed to halt dealings in names from the region starting Monday (Mar 2), a separate person said.

Regulators are tightening checks in parallel. The Hong Kong Monetary Authority contacted at least two local banks this week to review their exposure to Middle Eastern loans and bonds, people familiar with the matter said. China’s National Financial Regulatory Administration has also directed domestic lenders to examine their financing activities in the region – including debt extended to state entities – and report their findings as early as this week, separate people have said.

The reassessment by regulators and the potential pullback by Chinese banks – now among the Gulf’s leading financiers – comes as the Iran crisis threatens to reshape lending strategies and inject fresh uncertainty into expansion plans across the Middle East.

Chinese banks’ loans extended to the region jumped nearly three-fold to a record US$15.7 billion in 2025, excluding bilateral facilities, with the bulk going into Saudi Arabia and United Arab Emirates, according to Bloomberg-compiled data.

HKMA and NFRA did not immediately respond to requests for comment.

For now, most Asian banks are adopting a wait-and-see approach, though early signs suggest some are considering pausing deals with Gulf borrowers, following missile strikes by the US and Israel that killed Iran’s supreme leader. Abu Dhabi National Oil, the UAE’s biggest oil producer, has halted plans to market its first-ever yuan-denominated bond, which could have raised as much as 14 billion yuan (S$2.6 billion).

With the global economy already strained by Trump’s tariff agenda and mounting anxiety over artificial intelligence’s impact on labour markets, the latest surge in Middle East tensions has delivered another shock.

SEE ALSO

Asian banks’ billions in Gulf loans at risk amid Middle East turmoil

Volatility has rippled across Asian markets, sending investors rushing into safe havens such as the US dollar and gold, while equities and other risk assets tumble. BLOOMBERG