China Eliminates Hundreds of Rural Banks as Bad Loans Weigh on Small Lenders

China experienced a significant reduction in rural small and midsize banks, with 670 fewer at the end of 2025 compared to the previous year. Many of these banks were consolidated into larger lenders or converted into branches, rather than collapsing. The decline has continued into 2026, with a substantial number of village banks ceasing independent operations.

• 670 fewer rural small and midsize banks in China by the end of 2025, an 18.6% decrease.
• Many banks were merged into larger lenders or converted into branches.
• This represents the disappearance of independent banking entities, not conventional collapses.
• The trend continued in 2026, with 191 village banks ceasing independent operations in the first nine months.
• As of September 30, 2026, 973 village banks remained, down from 1,651 at the end of 2021.