Against the backdrop of slowing economic growth and the accumulation of systemic financial risks, the Chinese banking industry, especially small and medium-sized financial institutions, is undergoing a profound reshuffle. Data shows that nearly 100 village banks were dissolved in 2024 alone, and this trend is continuing into 2025.
In recent times, many Chinese banks have issued announcements of absorbing and merging village banks. For example, Shunde Rural Commercial Bank plans to absorb and merge with multiple institutions like Shenzhen Longhua Xinhua Village Bank, and convert them into branch institutions. Jiangsu Bank has been approved to acquire Jiangsu Danyang Su Yin Village Bank and establish a new branch; Shengjing Bank is also planning to acquire four village banks under its jurisdiction. These cases indicate that village banks are being “eliminated” through mergers initiated by the main sponsor or conversion into branch institutions.
Further confirming the severity of this trend, data from the China Banking and Insurance Regulatory Commission shows that as of the end of 2024, there were 44 fewer rural commercial banks, 41 fewer rural credit cooperatives, and 98 fewer village banks, with the decrease in village banks being particularly prominent.
At the same time, the latest list of deposit insurance institutions released by the People’s Bank of China shows that as of the end of March 2025, the total number of banking financial institutions participating in deposit insurance nationwide has decreased to 3713, a reduction of 48 in just three months since the end of 2024.
In 2025, China’s regulatory authorities have listed “accelerating the reform and risk reduction of small and medium-sized financial institutions” as the top priority for the year, with “mergers and reorganization” as the core path. This reflects the widespread lack of economic strength, capital adequacy, and market competitiveness of village banks.
Industry experts analyze that the exit of village banks is not simply a reduction in numbers, but a concentrated reflection of the deterioration of the economic environment and the fragility of the financial system. While mergers and reorganizations can temporarily alleviate the risks of some institutions, the process of integration involves complex elements such as equity transfer and institutional optimization, posing significant operational challenges.