BEIJING, Feb. 21 (Xinhua) -- Chinese banks face increasing challenges to tame domestic credit risks, given heavy-handed macrocontrols at home and a possible demand shock reverberating from a recession in the United States, says a report by Standard and Poor's.

    According to the report released on Thursday, market risks resulting from the global credit crisis largely appeared to be manageable for Chinese banks.

    "Lending in China has ballooned in recent years, ratcheting up credit risks," said Standard and Poor's credit analyst Liao Qiang," In a still remote scenario, a large-scale deterioration in loan quality could hurt ratings."

    The market risk appetite of Chinese lenders is generally conservative, and risk management, though far from cutting-edge, is adequate for their uncomplicated market risk profiles, the report says.

    The direct impact on most Chinese banks from the U.S. mortgage market turmoil engulfing global lenders should be limited because of the relatively small exposure, according to Standard and Poor's.

    But challenges are looming on the corporate lending front, says the report. The corporate non-performing loan (NPL) ratio could jump this year because of the negative impact of credit tightening on marginal borrowers, resulting in the deterioration of special-mention loans to NPLs and weaker dilution as a result of slowing loan growth.