China's banking consolidation program is designed to reduce risk, especially among small financial institutions. Since 2022, the integration of rural cooperatives and rural commercial banks has been carried out in at least seven provinces, which is seen as one of the top priorities for 2023. The non-performing loan ratio in China's rural cooperative system is as high as 348%, more than double the industry as a whole.
China is pushing ahead with reforms at a faster pace, and an important way to address risks is through mergers and acquisitions. However, this process also faces some social problems, such as the **activity that occurred in Henan Province in 2022, **The **event** is that several village and township banks cannot withdraw billions of dollars.
The problems of China's local banks have long been foreseen, and analysts believe that rural cooperatives may be the most opaque part of the entire Chinese banking system. In the last large-scale cleanup, China disposed of bad debts equivalent to about 13% of its GDP. Although the risk of rural banks being transmitted to the financial system as a whole is limited, if something happens to these institutions, it can cause significant damage in their specific areas.
Although the number of risky banks has halved from its peak to 337 after years of risk crackdown, about 96 percent of them are small rural commercial banks, credit cooperatives and village banks. As a result, China** has begun to consolidate these banks to further reduce risk.