BEIJING, July 18 China Construction Bank
, the world's No.2 bank by market value,
will suffer "some losses" from its 3 billion yuan ($470.74
million) exposure to a private company that filed for
bankruptcy, the bank's vice president was quoted as saying on
Zhu Hongbo was quoted by the Financial News, a paper run by
China's central bank, as saying the bank holds 3 billion yuan of
debt in Zhongjiang Group, of which 98 percent is guaranteed or
backed by collateral, and 1.6 billion yuan in loans.
Zhongjiang, based in China's entrepreneurial hub of
Zhejiang, is a conglomerate with businesses in investment,
property and chemicals. Its decline highlights the difficulties
companies face as they fight China's worst economic downturn in
three years and underscores the credit risks facing Chinese
banks as struggling businesses default.
"We will have some losses, but we had already set aside
provisions last year," Zhu was quoted as saying on Wednesday.
Zhu said the Zhongjiang case showed the bank's risk
management system was flawed on a branch level, but said risks
around Zhongjiang can be controlled and that the Zhejiang
government is restructuring Zhongjiang.
Xinhua reported in June that the Zhejiang police had
arrested Yu Zhongjiang, the owner of the company, on suspicion
that he had illegally collected public funds.
($1 = 6.3729 Chinese yuan)
(Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Matt