In 2025, China eliminated 670 small rural banks—nearly one in five—as they were facing elevated financial risks. Most weren’t shut down; they were folded into larger banks. It was consolidation of an unprecedented scale.

But the risks haven’t gone away. They’re now concentrated in fewer, larger banks, often tied to local governments that are themselves deep in debt.

And the problem isn’t limited to rural lenders. Across China’s banking system, the same issues appear: layers of debt stacked on debt, shadow banking, and bad loans classified as healthy.

Chinese banks powered the country’s economic boom, but they also absorbed much of its strain. That pressure has to be released somehow. Doing so without triggering a shock may be one of the regime’s biggest challenges.

Views expressed in this episode are opinions of the host and guests and do not necessarily reflect the views of The Epoch Times.

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Terri Wu is a Washington-based freelance reporter for The Epoch Times covering education and China-related issues. Send tips to terri.wu@epochtimes.com.

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