Is China headed for a perfect financial storm?

• Published 20 May 2010

Banks' capital raising plans look under increasing pressure as stock markets reel.

It has all the makings of a perfect financial storm. Chinese banks that binged on lending last year now need urgently to replenish their capital bases, which are falling below the levels that the regulator demands to support continued lending. But their plans to raise around Rmb 500bn this year are looking increasingly fanciful as stock markets in Shanghai and Hong Kong are roiled by a confluence of factors, including a cooling domestic real estate market and worries over European demand for Chinese exports.

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