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Reuters/Neil Hall
Exposed?

British banks have an outsized exposure to a China downturn

By Richard Macauley

For a small country that does little trade with China (paywall), UK banks are drastically exposed to a potential downturn in the world’s second-largest economy.

According to Fitch, a ratings agency, British banks have at least $92 billion of assets exposed to mainland Chinese operations—in terms of individual territories, that’s second only to Hong Kong:

And that data doesn’t include Britain’s potential exposure via HSBC or Standard Chartered, two UK banks with a heavy focus on Asia. That’s because Fitch attributed these banks’ mainland China exposure to their Hong Kong subsidiaries. If we are to include them, the UK’s exposure levels would be even greater.

Asia-Pacific-based banks also have relatively high exposure, according to the data, but a recent report from Bloomberg Markets states that the region is home to some of the strongest banks in the world, with some being better capitalized than many of their Western counterparts.

Nevertheless, a good hedge against a China downturn is increasing in importance globally.