Global Emerging Markets Quarterly - 1Q 2010

Infrastructure loans a possible Achilles heel to Chinese Banks The pathology of the Western financial crisis is all too familiar: misallocation of capital fuelled by cheap credit and lax regulation, a proliferation of investment vehicles with limited credit assessment, and systemic biases predicated on ever rising real estate prices. We should worry, then, that Chinese banks may be facilitating a home-grown version, especially as they plan to raise USD30-50bn in capital over the coming year.