THE business of financing China’s trade is shrinking, curbing what had been a fast-growing revenue stream for banks in Hong Kong and Singapore over the past decade.

    Since reaching a peak of about US$145 billion in June last year, the value of trade loans provided by lenders in the two financial hubs has tumbled 20 percent due to the slowing Chinese economy and a slump in commodity prices, central bank data show.

    The slide raises concern that Singaporean banks such as Oversea-Chinese Banking Corp. and global lenders like Standard Chartered Plc. and HSBC Holdings Plc., which have been financing trade in Asia since the mid-19th century, may face lower earnings growth. The companies have profited from the 10-fold surge in trade loans since China’s 2001 entry into the WTO.

    “Loan growth at banks is definitely coming down as trade finance has been a driver,” said Matthew Phan, a Singapore-based analyst at CreditSights LLC. “There will be some small negative impact on banks’ overall profits as net interest margin from this business is usually thin.”

    Trade-related borrowings booked by banks in Hong Kong and Singapore fell in each of the three months through April to a two-year low of US$110.6 billion, data from the cities’ monetary authorities show. (SD-Agencies)