In a recent report, it has been revealed that the number of village and town banks in China has fallen below 1,000 for the first time, with an average of one disappearing every two days this year. As China’s economy experiences a downturn and financial risks remain high, a concentration of risks from the bottom up has become evident.
On September 21, the Ningbo Financial Regulatory Bureau issued a reply regarding the dissolution of Cixi Minsheng Village and Town Bank Co., Ltd., approving the dissolution of the bank. All assets, liabilities, businesses, branches, employees, and other rights and obligations of Cixi Minsheng Village and Town Bank will be taken over by China Minsheng Bank Co., Ltd. This marks the latest village and town bank to be dissolved.
According to the list of institutions exiting provided by the China Banking and Insurance Regulatory Commission, a total of 13 village and town banks across the country exited between September 14 and 20, bringing the total number of legal entities of village and town banks down to 986, breaking the 1,000 mark for the first time since their inception in 2007.
Another village and town bank with assets of around 3 billion yuan was absorbed and merged by a bank with assets of around 1.6 trillion yuan, sparking public attention. On September 20, the Shanghai Financial Regulatory Bureau approved the absorption and merger of Shanghai Chongming Hushang Village and Town Bank by Shanghai Rural Commercial Bank. Following the merger, Chongming Hushang Village and Town Bank will be dissolved, and all its assets, liabilities, institutions, businesses, employees, and other rights and obligations will be taken over by Shanghai Rural Commercial Bank.
It is worth noting that unlike previous cases of cross-provincial and cross-regional mergers, Shanghai Chongming Hushang Village and Town Bank was directly absorbed by its parent company, Shanghai Rural Commercial Bank. After a thorough asset and liability examination, all assets, liabilities, businesses, employees, and branches of the original village and town bank will be taken over by Shanghai Rural Commercial Bank, with the original bank’s legal entity dissolved. This marks one of the relatively few cases where the head office directly absorbed and merged a village and town bank during the consolidation process.
The first village and town bank in China, Yilong Huimin Village and Town Bank in Sichuan, was established on March 1, 2007. Since then, village and town banks expanded at a pace of hundreds of new banks per year, surpassing 1,000 in October 2013, reaching 1,500 by the end of 2016, exceeding 1,600 by the end of 2018, and hitting a peak of 1,651 by the end of 2021.
In the past three years, the rate of village and town bank dissolutions has increased. In 2022, 8 banks were dissolved; in 2023, 9 banks; in 2024, 83 banks; in 2025, 310 banks, more than three times the total of the previous three years. As of 2026, the number has decreased to 986 banks, a reduction of 665 banks or about 40% compared to the peak.
Public information shows that among financial institutions in China’s banking sector, a total of 401 banks have been merged or dissolved this year, most of which are small and medium-sized banks in county-level areas, including village and town banks, rural commercial banks, and rural credit cooperatives. The provinces with the highest number of dissolution and mergers are Gansu, Jilin, and Guizhou. Analysts believe that this trend reflects the ongoing economic downturn in China and the increasing exposure of banking risks.
Political observers have pointed out that village and town banks, familiar with the operations of local enterprises, play a crucial role in providing flexible lending services to small and medium-sized businesses. When the Chinese economy faces challenges, and small businesses struggle to develop, leading to shutdowns or bankruptcies, the non-performing loan ratio of village and town banks rises, leading to a contraction in lending services and even the risk of insolvency.
Song Weijun, a researcher at “Tianjun Political Economy,” previously mentioned in an interview with Dajiyuan: “Small and medium-sized banks are like the capillaries of local economies. When these banks fail, it reflects the plight of thousands of small and medium-sized enterprises. The current state of banks is a manifestation of the malfunctioning growth model of the entire Chinese economy and the distortion of the financial system under political pressure.”