Bank of China Australia Limited is preparing to deepen its presence in local lending markets after its Beijing-based parent pledged to refresh the capital base of the local arm.The latest financial accounts of the BOCAL subsidiary filed with ASIC show that its regulatory capital position declined by 1.21 percentage points in the 12 months to the end of December.BOCAL is growing its lending operations rapidly across Australia, having more than doubled the size of its loan book since 2014.Lending grew by A$308 million to $1.49 billion last year mostly on the back of strong growth in mortgage and business lending.The surge in risk-weighted assets has eaten into the bank's capital buffer, with the total capital base declining to 12.53 per cent at the end of December from 13.74 per cent a year before.While BOCAL's capital position remains well above APRA's requirement that it maintain a minimum capital ratio of 8.5 per cent, directors revealed in notes to the accounts that the parent company would make additional loans to the subsidiary. The directors indicated that the parent would make $60 million worth of loans in two tranches this year that would qualify as Tier 1 and Tier 2 capital.BOCAL's return on equity of 7.5 per cent is relatively low for an Australian banking business, but the 2017 accounts indicate that the bank is gaining earnings momentum.The subsidiary boosted net profit by 53 per cent to a record $8.6 million, despite the negative impact of APRA's crackdown on investment lending.Disclosures in the 2017 financial report shed new light on how APRA's macro-prudential measures are impacting the lending activities of foreign-owned banks that typically attract a higher proportion of non-resident borrowers.To comply with APRA's new standards, the Bank of China arm tightened the availability of mortgage credit to Australian non-residents.During 2017 the bank capped lending to non-residents through its Australian branches at 30 per cent of all new home loans.A cap was also applied on investment lending. BOCAL branches were told last year to lay no more than 30 per cent of new home loans with investors. In some cases investment lending to non-residents was suspended.The strategic consequence of the APRA-induced changes was to push the bank into competing for owner-occupier loans in the mainstream of the local market.In the last year "Bank of China" branded financial products have begun to appear on comparison sites such as Canstar and Finder.As a supervised entity, BOCAL is currently less able to meet demand from Chinese citizens wanting to invest in Australian housing.Presumably, such investors are now turning to a swathe of less regulated finance companies to source loans.Investigative reports by the ABC Four Corners program last year found that some of the finance companies targeting non-resident borrowers are owned by Chinese property companies developing Australian housing projects.BOCAL's lending in Australia is now mostly funded through customer deposits. The bank last year grew its deposit base by $220 million to $1.73 billion.The BOCAL board is chaired by Professor Stephen Martin, a former speaker of the House