China’s economy continues to decline, leading to a crisis in rural cooperative banks. Over the past year, there has been an accelerated exit of rural cooperative banks, with several banks dissolving at the end of April. These banks’ assets and liabilities are being taken over by shareholder banks. Experts indicate that this is part of the authorities’ financial stability measures, reflecting the seriousness of the issues faced by rural cooperative banks. Beijing’s control over financial institutions will only lead to greater risks.
Public data shows that in China, rural cooperative banks are established in rural areas with investments from financial institutions, non-financial businesses, or individuals, approved by official authorities. These banks primarily serve the financial needs of local farmers, with shareholders being banks holding at least a 20% stake and limited to lending within their county or district.
According to reports by mainland media outlet “The Paper,” the Jiangsu Banking Regulatory Bureau announced the dissolution of the “Jiangsu Dafeng Jiangnan Rural Cooperative Bank” on April 30. Its assets, liabilities, operations, branches, staff, and other rights and obligations are now inherited by the “Jiangsu Jiangnan Rural Commercial Bank.”
On the same day, Tianjin Rural Commercial Bank established 10 branches in the Jinnan District of Tianjin, which were formerly part of the dissolved “Tianjin Jinnan Rural Cooperative Bank.” Qingdao Rural Commercial Bank also absorbed and merged with the “Qingdao Jimo Huimin Rural Cooperative Bank” to become a branch of Qingdao Rural Commercial Bank.
April 30 also saw the dissolution of the “Tengchong Minsheng Rural Cooperative Bank” in Yunnan, with its operations being taken over by Minsheng Bank. Similarly, the “Tongnan Minsheng Rural Cooperative Bank” in Chongqing was dissolved, with Minsheng Bank taking over its operations. Previously, Minsheng Bank acquired the “Puer Minsheng Rural Cooperative Bank” and the “Linzhi Minsheng Rural Cooperative Bank” on December 26, 2025, establishing branches in Puer and Linzhi.
In recent years, China’s economy has been on a downward trend, leading various industries to undergo “downsizing” to address the crisis. “Securities Times” reported on April 21 that within the first hundred days of the year until April 20, 72 rural cooperative banks completed exit and deregistration procedures. This marked a 167% increase compared to the same period the previous year, which had 27 banks exiting.
Data from the China Banking and Insurance Regulatory Commission shows that by the end of 2025, a total of 226 rural cooperative banks had completed deregistration and exited the market. In comparison, the numbers for 2024, 2023, and 2022 were 83, 9, and 8 respectively.
A previous report by “21st Century Business Herald” highlighted that at the beginning of 2026, commercial banks accelerated the integration and exit of affiliated rural cooperative banks. The industry trend of “village-to-market bank conversion” has swept through the domain of commercial banks.
Professor Sun Guoxiang from the Department of International Affairs and Business at Nanhua University in Taiwan explained to Epoch Times that the mass dissolution of rural cooperative banks represents a risk disposal project by the authorities, indicating the severity of issues within these banks.
He pointed out that rural cooperative banks have long suffered from weak capital, weak internal controls, irregular lending practices, and employee misconduct. For example, the case where 18 million yuan in deposits from Jilin residents were embezzled through forged signatures and unauthorized card transactions is a typical case illustrating that the issue is not just about bad debts but also about deposit security. The current official push for shareholder banks to take over assets and liabilities aims to prevent the local rural banks from collapsing and triggering bank runs, but this only shifts the risk from small banks engulfed in crisis to larger banks.
He emphasized that the primary concern should be for depositors with amounts exceeding 500,000 yuan, who may have weaker legal protection in scenarios of extreme bankruptcy or liquidation by the banks. Furthermore, if bank employees engage in irregular operations, such as forging signatures or unauthorized transfers, depositors may be subject to waiting through legal proceedings. Finally, if certain funds are packaged into high-yield deposits, wealth management products, or structured products, or purchased through third-party platforms, the risk of institutional protection and execution increases. The most practical approach for ordinary depositors is to diversify their deposits across different banks to avoid over-concentration.
American economist David Huang told Epoch Times that the majority of rural cooperative banks in China have turned into platforms for local elites, irregular sources of direct investments, and private financial accounts for corrupt major shareholders over the past few decades. The current high bad debt ratio and insufficient capital adequacy ratio have reached a critical point where if left unaddressed, it could lead to localized social unrest and financial risks. The breakdown of internal controls in rural cooperative banks is a symptom, but the ineffective governance structure is the essence of the problem.
The Chinese Communist Party’s Central Political Bureau convened a meeting on April 28, stating the intention to promote the reform of “small and medium-sized financial institutions to stabilize and enhance confidence in the capital market.” The authorities had previously declared that small and medium-sized financial institutions should “reduce quantity and improve quality.”
Huang pointed out that the current approach of the authorities involves using larger banks with relatively stronger capabilities to merge and absorb rural cooperative banks. This strategy merely prolongs and masks potential hazards, exchanging time for space. If large banks, facing issues such as real estate trust exploitation, corporate bad debts, and local government debt repayment failures, are forced to absorb several problematic or bankrupt rural cooperative banks, it could lead to inferior currencies driving out superior ones.
Huang noted that the legal responsibility for the legitimate deposits in rural cooperative banks now falls on the larger banks, providing some nominal security to ordinary depositors. However, many rural cooperative banks in the past relied on numerous third-party platforms for high-yield wealth management deposits, along with some funds that were reorganized, often not being fully protected due to being labeled as the individual actions of bank employees with the banks disclaiming responsibility. These deposits and misappropriated funds are often left without repayment.
Huang remarked that the wave of intense dissolution among rural cooperative banks indicates that the regulatory authorities have recognized that these small institutions lack the ability to self-repair, and closure is the only solution to uphold financial system stability. However, the takeover of rural cooperative banks by larger banks does not eliminate risks but internalizes and transfers them. Beijing’s approach to managing financial institutions under the party’s directive will only escalate risks.
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