The ongoing global financial turbulence will have a limited impact on China's banks and financial system in the short run, according to officials and experts.

"We feel China's financial system and its banks are, to the chaos developed in the U.S. and other parts of the world, relatively shielded from those problems," said senior economist Louis Kuijs at the World Bank Beijing Office.

He told Xinhua one reason was that Chinese banks were less involved in the highly sophisticated financial transactions and products.

"They were lucky not to be so-called developed, because this (financial crisis) is very much a developed market crisis."

A few Chinese lenders were subject to losses from investing in foreign assets involved in the Wall Street crisis, but the scope and scale were small and the banks had been prepared for possible risks, Liu Fushou, deputy director of the Banking Supervision Department I of the China Banking Regulatory Commission, told China Central Television (CCTV).

Chinese banks had only invested 3.7 percent of their total wealth in overseas assets that were prone to international tumult, CCTV reported. The ratio of provisions to possible losses had exceeded 110 percent at large, state owned listed lenders, 120 percent at joint stock commercial banks and 200 percent at foreign banks.

Kuijs noted most of the banks resided in China where capital control made it more difficult to move money in and out. Besides, the country's large foreign reserves prevented the financial system from a lack of liquidity, which was troubling the strained international markets.

"At times like this, one cannot rule out anything," he said. "But still we believe the economic development and economic fundamentals in China are such that it's not easy to foresee a significant direct impact on the financial system."

However, he expected an impact on China's banks coming via the country's real economy, as exports, investment and plans of companies would be affected by the troubled world economy and in turn increase pressure on bad loans.

Wang Xiaoguang, a Beijing-based macro-economist, said the growing risks on global markets would render a negative effect on China in the short term but provided an opportunity for the country to fuel its growth more on domestic demand than on external needs.

He urged while China, the world's fastest expanding economy, should be more cautious of fully opening up its capital account, the government should continue its market reforms on the domestic financial industry without being intimidated.

Chinese banks had strengthened the management of their investments in overseas liquid assets and taken a more prudent strategy in foreign currency-denominated investment products since the U.S.-born financial crisis broke out, CCTV reported.

(Xinhua News Agency October 5, 2008)