Contagion risks rise as China lenders fund one another's loans

Beijing

CHINA's smaller banks have never been more reliant on one another for funding, prompting rating companies to warn of contagion risks in any crisis.

Wholesale funds, including those raised in the interbank market, accounted for a record 34 per cent of small and medium-sized bank financing as at June 30, compared with 29 per cent on Jan 31 last year, Moody's Investors Service estimated in an Aug 29 note that analysed central bank data. Shanghai Pudong Development Bank Co's first-half earnings showed its short-term borrowings and repurchase agreements surged by 75 per cent in the past three years, while its consumer deposits rose just 24 per cent.