From AFX News via Forbes.com:
China’s banking industry faces the prospect of a significant increase in bad loans, if interest rates rise rapidly and the value of the yuan, ratings agency Standard & Poor’s said in a report.
It estimates that if the Chinese yuan appreciates by 25 pct and interest rates increase by 200 basis points, the corporate sector’s net profit could fall by about a third and the banking sector’s nonperforming loan ratio could rise by up to nine percentage points.
This scenario would materialize if both sectors fail to take any countermeasures to mitigate risks and losses, S&P said. [Full Text]
Also see Don’t Bank on China for stories about non-performing loans