FINANCE

China Cuts 670 Rural Banks as Financial Sector Overhaul Accelerates

Published: Aug. 15, 2026 1:16 a.m. GMT+8

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Rural small and midsize lenders accounted for most of the decline, with their ranks shrinking 18.6%. Photo: VCG

China’s top financial regulator reported a sharp decline in the number of legal-entity financial institutions in 2025, led by the elimination of 670 rural small and midsize banks as authorities pressed ahead with a broad sector overhaul.

The consolidation underscores Beijing’s escalating effort to contain risks in the country’s fragile regional banking system through mergers and acquisitions, creating larger and better-capitalized institutions to help withstand economic pressure.

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China's financial regulator reported a 711 drop in legal-entity institutions to 6,489, driven by 670 rural bank eliminations.
Consolidation formed larger banks; Hainan Rural Commercial Bank assets grew 9.8% to 412.4 billion yuan.
Asset quality remains challenging; rural commercial banks' NPL ratio stood at 2.8% in Q2 2026.

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Who’s Who

Hainan Rural Commercial Bank: Hainan Rural Commercial Bank, opened in July 2024 as a unified provincial bank, reported total assets of 412.4 billion yuan ($61.1 billion) at the end of 2025, up 9.8% year-on-year. Following consolidation, it disposed of 9.7 billion yuan of nonperforming loans and met 2025 risk-resolution targets by absorbing smaller village banks.

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What Happened When

Since 2021：: China began a province-by-province overhaul of rural credit cooperatives and village banks, targeting consolidation of smaller lenders into larger provincial or city-level commercial banks.

Since 2022：: Sichuan province started setting up city-level unified banks as part of its rural credit reform.

July 2024：: Hainan Rural Commercial Bank opened as a unified provincial bank.

As of end of 2024：: The number of legal-entity financial institutions in China was 7,200 (derived from 6,489 + 711).

As of end of 2025：: The number of legal-entity financial institutions fell by 711 to 6,489, led by the elimination of 670 rural small and midsize banks.

As of end of 2025：: Hainan Rural Commercial Bank reported total assets of 412.4 billion yuan ($61.1 billion), up 9.8% from a year earlier. It also disposed of 9.7 billion yuan of nonperforming loans and met its 2025 risk-resolution targets by absorbing several smaller village banks.

By 2025：: Sichuan's rural credit reform eliminated 74 legal entities, raised 13.7 billion yuan in capital, and lowered the overall nonperforming loan ratio to 2.65% from 3.5%. Capital adequacy ratios at 16 restructured institutions averaged 13%, up 0.9 percentage point from before the overhaul.