Dollars and yuan: spillover effects

Analysts are warning that China's increasing reliance on foreign-currency loans could pose a serious risk for the global financial system.

The Chinese banking sector presents a growing risk to the global financial system, reports a February edition of the Sydney Morning Herald.

Charlene Chu, a former senior analyst at Fitch in Beijing, says the rapid growth of foreign-currency borrowing in China (particularly in US dollars) is cause for concern. By March 2013, foreign currency loans booked in China had climbed to US$880 billion from US$270 billion in 2009. Now, analysts say the total is likely to top US$1 trillion. This could make the Chinese financial system dangerously vulnerable to a rising dollar.