China closed a record 670 banking institutions in 2025 as part of a sweeping consolidation effort to address risks in the country’s rural banking sector. The closures, amounting to roughly one-quarter of China’s banks, were aimed at enhancing banking-system stability by merging and dissolving smaller lenders. The consolidation was driven by weak asset quality, low capitalization, and governance issues particularly prevalent in city and rural commercial banks, as highlighted by Fitch Ratings. Fitch emphasized that small banks, especially rural ones, are the most vulnerable due to their financial indicators. Annualized returns on assets for rural banks dropped to 0.45% in…
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