293 Banks Exit the Financial Arena in 2025: A Major Reshuffle in China’s Banking Landscape

Saying Goodbye: The Great Reshuffle of China’s Banking Sector

In recent years, China’s banking industry has been undergoing a sweeping transformation. By the end of the third quarter of 2025 alone, 293 independent banks have “exited the arena” — some through dissolution, others through mergers. According to data from QibaiKe, as of September 30, 2025, the National Financial Regulatory Administration (NFRA) approved the dissolution of 166 banks, the merger of 127 banks, and the official deregistration of 10 more. Most of the institutions disappearing from the market are rural commercial and village banks. With the continued creation of provincial-level banks and reforms such as “village-to-branch” transitions, more small-scale banks are expected to vanish in the coming years.

For years, small and medium-sized financial institutions played a vital role in bridging service gaps, especially in rural areas. However, their limited management capacity and weak risk resistance have left them vulnerable. The push for digital transformation and increased competition from larger banks have made mergers and restructurings inevitable. In Ningxia, for example, Ningxia Bank announced on May 29 that it would absorb Helan Huishang Village Bank, transforming it into a new branch while inheriting all assets, liabilities, and customer contracts. Similarly, Inner Mongolia Rural Commercial Bank was officially established on May 16, absorbing 120 institutions, including the Inner Mongolia Rural Credit Cooperative Union, which ceased operations the same day. Other examples include the Shunde Rural Commercial Bank, which continues to merge multiple village banks across Guangdong, and Jiangsu Bank, which recently acquired Danyang Suyin Village Bank to form new branches across the region. Even listed banks have joined this restructuring wave. Wuxi Rural Commercial Bank, for instance, approved plans to absorb Tongshan Village Bank and Jiangyan Village Bank, signaling the steady pace of consolidation.

Before 2019, the number of banking institutions grew rapidly — largely thanks to the proliferation of village banks. But since then, China has tightened regulation to reduce systemic risks. The 2022 village bank crisis in central China became a turning point, accelerating the consolidation process. Between 2020 and 2024, the total number of banking institutions dropped from 4,604 to 4,295, a reduction of 309 institutions. The pace of decline has quickened each year — with 195 disappearing in 2024, followed by 293 more in 2025 so far. In total, around 600 banks have vanished over just a few years, marking one of the most dramatic restructurings in modern Chinese financial history. This downsizing is not a collapse — it’s a controlled reform to defuse financial risks. Following the Central Financial Work Conference in October 2023, regulators and local governments have prioritized restructuring and stabilization of small and medium financial institutions.

Recent large-scale mergers underscore this trend. On September 28, Henan Rural Commercial Bank announced the absorption of 82 banks across nine cities, having previously merged 25 institutions — a total of 107 banks in one go. In August, Jilin Rural Commercial Bank was approved for establishment, combining 13 existing banks into a unified provincial entity. Similarly, Inner Mongolia Rural Commercial Bank, launched in May, consolidated 120 institutions across the province. These efforts are financed mainly through special-purpose bonds, with additional support from local fiscal funds and asset revitalization programs — all aimed at stabilizing the system while managing risk.

China still has over 4,000 banking institutions, but industry experts believe the sector has reached a turning point. The era of rapid expansion is over — the focus now shifts from quantity to quality. In the next three to five years, the total number of banks is expected to fall to around 3,000, driven by ongoing integration among rural and small commercial banks. Provincial-level consolidations will continue to emerge, particularly in regions with struggling institutions. The NFRA’s 2025 regulatory conference emphasized accelerating reform and risk mitigation across small and medium financial institutions. Government reports further call for a market-driven and law-based approach to restructuring, focusing on capital replenishment, mergers, and orderly exits. Through absorption and restructuring, smaller rural banks can leverage the resources, risk management systems, and digital infrastructure of their parent institutions, ultimately improving service quality and operational efficiency.

While consolidation brings efficiency and stability, it also introduces short-term challenges such as workforce realignment and technical integration. Yet, international experience shows that banking sectors typically emerge leaner, stronger, and more resilient after such reform waves. China’s rural and local markets still hold enormous potential. Small institutions retain unique regional advantages, especially in serving agriculture and small businesses. However, shrinking profit margins and rising non-performing loans remain existential challenges for many. The battle for survival among small banks will be tough and unforgiving — but it also marks the start of a new chapter for China’s financial system: one that prizes stability, quality, and sustainable growth over sheer expansion.