BEIJING, Dec 25: China’s state lenders have reported impressive growth in earnings but harder times may be on the way, testing their ability to withstand a downturn, a top banking regulator cautioned on Tuesday.

Cai Esheng, vice chairman of the China Banking Regulatory Commission, told a financial forum that banks should not be complacent but should prepare to face potential stumbling blocks by enhancing their risk controls and corporate governance.

“Our banks have been developing robustly and have made a lot of money, but so what?” Cai said. “There is still a question mark as to whether we can withstand challenges, present or future.” Cai cited the subprime mortgage crisis in the United States as a warning to Chinese banks that even well-established financial institutions could get into trouble.

Chinese lenders, which rely mostly on lending for their profits, could suffer once the economy turns sour, he said.

The comments reflect concerns in Beijing that although China’s state banks have shed their debt-ridden past to become some of the world’s largest by valuation, on the back of government bailouts and strong economic growth, there may be lingering problems of internal management and governance.

State-owned banks, including Industrial and Commercial Bank of China, China Construction Bank Corp and Bank of China have been warmly welcomed by investors in their public listings over the past few years.

Cai reiterated that China was not ready to lift the ceiling on foreign ownership of its banks anytime soon.

US and European financial institutions have been pressing Beijing to lift ownership caps, hoping to better tap the growth in financial services that is accompanying China’s economic boom.

“The extent to which China’s banking market will be open to the outside depends on how much other countries open their markets to Chinese banks,” he said, echoing earlier comments by CBRC chief Liu Mingkang that greater openness would depend in part on the United States giving more access to Chinese banks.—Reuters