China says banks are strong

By Jason Subler and Zhou Xin

BEIJING (Reuters) - China's banks are in good shape to ride out the global financial crisis and have provided a crucial boost to the domestic economy through a surge in lending, the banking regulator said on Thursday.

Liu Mingkang, chairman of the China Banking Regulatory Commission, mixed his confident overview of the country's banking sector with a pledge that the government would act firmly to prevent a rise in bad debt.

That vigilance will include careful examination of new loans by Chinese banks, along with tighter regulation of their overseas investments, a source briefed on the plans told Reuters.

China's banks made 1.6 trillion yuan (164 billion pounds) in new loans in January, a monthly record, after strong loan growth in the last two months of 2008 as well.

Some analysts have expressed concern that the rush of lending could swell bad debts on banks' books, but Liu Mingkang said the ample credit would give a lift to the economy and was nothing to be worried about.

"Our general analysis and investigations have proven that the fundamentals are normal," he told a news conference in Beijing.

He also struck an upbeat note on the health of Chinese banks at a time when many of their international counterparts have seen balance sheets battered by plummeting asset values and have turned to investors and governments for capital injections.

"Generally speaking, this financial crisis has limited impact on the Chinese banking system and the risks along with it are under control," Liu said in a statement.