In 2022, China closed 670 banks, marking the largest number of bank closures in the country’s history. This accounts for nearly one in four financial institutions as Beijing takes steps to reduce financial risks amid a decelerating economy. Most of the closures involved rural banks, which have been identified as the weakest segment of the banking system due to issues such as poor asset quality, low capitalization, and governance challenges, according to Fitch.
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The closures aim to prevent potential liquidity crises among smaller banks, as noted by a Singapore-based expert in a Financial Times report. Following a period of aggressive credit expansion that fueled growth, experts from the Rhodium Group mentioned that the current problems within the financial system now limit sustainable growth.
Despite advancements in technology, including electric cars, dancing robots, and choreographed drones, China’s economic performance has fallen short of expectations, largely due to weak consumer spending, as reported by The Economist.