The Chinese banking industry is experiencing an unprecedented wave of restructuring, with over 40 small and medium-sized banks merging or being acquired in 2025. Recent transactions include Shunde Rural Commercial Bank’s absorption of Longjiang Xinhua Village Bank and Jiangsu Bank’s approved acquisition of Danyang Suyin Rural Commercial Bank. This consolidation reflects regulators’ determination to strengthen financial system stability through market-driven solutions.
Sector Transformation by the Numbers
The restructuring has reduced China’s deposit-insured institutions by 48 to 3,713 as of March 2025. In 2024 alone, 195 banking entities disappeared from the market, including 98 village/town banks and 44 rural commercial banks. Notably, over 90% of the 357 high-risk institutions identified in 2023 were rural cooperative entities or village banks, highlighting the pressing need for reform in these segments.
Structural Challenges Driving Change
Smaller financial institutions face multiple headwinds, including limited scale (average assets under ¥5 billion) and non-performing loan ratios double or triple the national average. The digital expansion of national banks has further eroded their competitive position. These market realities align with the 2025 Government Work Report’s directive for market-based risk resolution and the NFRA’s emphasis on capital replenishment or exit strategies for weak institutions.
Strategic Benefits of Consolidation
Acquiring banks are realizing significant advantages, with Jiangsu Bank’s branch network expansion demonstrating 20-30% cost savings compared to organic growth. Successful integrations like Changsha Bank’s absorption of Yizhang Changhang Rural Bank show tangible improvements, including 35% greater county coverage and a reduction in combined NPL ratios from 4.2% to 2.8% within six months.
Future of Rural Financial Services
Experts including PSBC Researcher Lou Feipeng recommend that surviving institutions focus on niche strategies, leveraging local market knowledge while developing innovative agriculture-supply chain finance products. Digital transformation through fintech partnerships is becoming essential for rural banks to remain competitive in an increasingly consolidated market.
Long-Term Sector Outlook
Industry analysts project 100-150 additional mergers by 2026, potentially creating 10-15 regional banking champions. The trend may accelerate adoption of financial holding company models as China prioritizes systemic resilience. This consolidation wave represents a fundamental reshaping of the banking landscape, with regulators clearly favoring quality and stability over quantity of financial institutions.
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