LONDON (Reuters) - China has become the largest emerging market destination for international bank lending, accounting for more than a quarter of cross-border claims on all emerging market economies, a central banking report shows.
Cross-border claims on China increased by $65 billion in the second quarter of 2014 to $1.1 trillion, and were up nearly 50 percent in the year to the end of June, according to a quarterly report from the Bank for International Settlements on Sunday.
“China has become by far the largest (emerging market) borrower for BIS reporting banks. Outstanding cross-border claims on residents of China totaled $1.1 trillion at end-June 2014, compared with $311 billion on Brazil and slightly more than $200 billion each on India and Korea,” the report says.
It said China’s share of BIS reporting banks’ foreign claims on all emerging markets stood at 28 percent in mid-2014, up from just 6 percent at the end of 2008.
The BIS, often referred to as the central bankers’ central bank, says China’s status as the principal emerging market destination for international bank lending reflects a “remarkable evolution” since the financial crisis of 2008-9.
However, concerns are mounting among international investors of a credit bubble developing in China, with the country’s property market seen as the biggest risk to the economy.
In late November, after saying for months that China did not need any big economic stimulus, the People’s Bank of China surprised financial markets with its first interest rate cut in more than two years to shore up growth and help firms pay off mountains of debt.
Outside China, cross-border claims on emerging market economies rose 2.7 percent, or $33 billion, in the three months to the end of June, the BIS said, with the increase coming mainly from Asia.
However, cross-border lending to Russia declined 10 percent. Russia has seen its finances come under strain from western sanctions over Moscow’s role in the Ukraine crisis and the falling price of oil, its main export.
Reporting by Chris Vellacott; Editing by Mark Trevelyan