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China speeds up bank integration
China is working to strengthen its financial system by accelerating the integration of small banks, which are often rural banks, with the aim of improving financial sector stability and easing economic pressures. In 2025, authorities closed about 670 financial institutions—one-quarter of the country's banks—as part of efforts to streamline and merge them into larger, more resilient entities with stronger capital foundations. However, rural banks still suffer from poor asset quality and low capital levels, with return on assets at 0.45% in the first half of 2026 compared to 0.56% in 2021, and the non-performing loan ratio rising to 2.8%, higher than the sector average of 1.5%. This occurs amid slowing economic growth, as GDP increased by 4.3% in the second quarter—its slowest pace since 2022—reflecting the challenges facing the world’s second-largest economy.
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