Comprehensive Restructuring in China's Banking System: 670 Banks Liquidated
As part of Beijing's steps to strengthen the financial system, 670 small-scale banks have been removed from the system, according to Fitch Ratings data.
The process of purging the banking sector in China of small institutions and merging them under larger structures has gained momentum. According to data shared by Fitch Ratings, 670 banks were liquidated in the year 2025 alone.
Liquidation of Small-Scale Banks
A wide-ranging restructuring process targeting small-scale institutions within China's banking system is being implemented.
According to Fitch Ratings data, 670 banks were liquidated in 2025 alone as a result of problems experienced alongside slowing economic growth.
Risks in Rural and Small Banks
Small and rural commercial banks, which are at the center of the restructuring process, are shown among the most fragile links of China's financial system.
Capital inadequacy, low profitability ratios, and non-performing loans in these institutions remain above the sector average.
Impact of the Real Estate Crisis on Balance Sheets
Loans belonging to real estate developers and local government financing vehicles in the portfolios of small banks are straining balance sheets.
The long-standing real estate crisis is creating pressure on the financial structure of banks operating on a local scale.
The New Model Targeted by Beijing
The Beijing administration aims to create highly capitalized, larger institutions whose central supervision is easier, instead of numerous small and weak banks.
Experts state that merger steps may increase transparency but will not completely solve structural problems in the short term.
Economic Slowdown and Growth Rates
This wave of liquidation in the banking sector coincided with a period when the world's second-largest economy recorded a slowdown in its growth rate.
Growing by 4.3 percent annually in the second quarter of the year, China's economy exhibited its lowest performance since 2022.