Can Pac Swire
According to a report by rating agency Fitch, citing information from China's National Financial Regulatory Administration (NFRA), over 670 banks were shut down in the country—a historic peak. Nearly all the shut financial institutions were situated in rural regions.
As a result, the total number of banks in the nation has declined to 3,139. From 2022 to 2025, the overall figure dropped by 23%.
The merger of regional banks in China's vast, state-managed banking system—holding around $64 trillion in assets—occurs amid sluggish loan demand in the globe's second-largest economy, according to the Financial Times.
Low interest rates and deflation in China are also pressuring bank profits, worsened by the continuing decline in the real estate market.
Jason Bedford, a senior visiting research fellow at the East Asian Institute of the National University of Singapore, highlights that consolidation in China's banking sector seeks to "streamline regulation" and "remove liquidity risks for smaller financial institutions."
"We've never witnessed consolidation of this magnitude previously," he states.
Fitch experts note that small Chinese banks "continue to be the system's weakest link because of inadequate asset quality, insufficient capital, and shortcomings in corporate governance, especially in less developed areas." They suggest that the increase in mergers within the sector and the liquidations that involve transferring a bank's assets to another financial entity will enable the regulator to enhance oversight.
source: ft.com
As a result, the total number of banks in the nation has declined to 3,139. From 2022 to 2025, the overall figure dropped by 23%.
The merger of regional banks in China's vast, state-managed banking system—holding around $64 trillion in assets—occurs amid sluggish loan demand in the globe's second-largest economy, according to the Financial Times.
Low interest rates and deflation in China are also pressuring bank profits, worsened by the continuing decline in the real estate market.
Jason Bedford, a senior visiting research fellow at the East Asian Institute of the National University of Singapore, highlights that consolidation in China's banking sector seeks to "streamline regulation" and "remove liquidity risks for smaller financial institutions."
"We've never witnessed consolidation of this magnitude previously," he states.
Fitch experts note that small Chinese banks "continue to be the system's weakest link because of inadequate asset quality, insufficient capital, and shortcomings in corporate governance, especially in less developed areas." They suggest that the increase in mergers within the sector and the liquidations that involve transferring a bank's assets to another financial entity will enable the regulator to enhance oversight.
source: ft.com