The continuous decline in the Chinese real estate market is expected to trigger a banking crisis. With the relaxation of housing price controls by the Chinese Communist Party, banks with real estate assets as collateral will face immense pressure and may experience a wave of closures. The six major banks in China are already closing more branches, and relevant data is already indicating this trend.
The Chinese economy’s ongoing downturn has inevitably impacted the banking system. Data shows that in 2024, nearly 200 small and medium-sized banks in China were deregistered, far surpassing the total number over the past three years.
According to a report from “First Financial Daily,” the Enterprise Early Warning data shows that in 2024, 199 small and medium-sized banks in China were deregistered, mainly rural financial institutions, significantly higher than the total from 2021 to 2023.
Among the 199 bank branches deregistered in 2024, there were 36 credit cooperatives, 56 rural commercial banks, 6 rural mutual aid funds, 100 village banks, and one city commercial bank. This includes 89 approved for dissolution, 102 approved for merger, and 8 deregistered.
In China’s six major banks, except for Agricultural Bank of China, offline branch numbers are continuously shrinking, decreasing by nearly 361 branches in 2024, averaging one closure per day. However, the CCP’s official media labels this trend as “streamlining.”
In recent years, China has been facing a crisis in the real estate market. The continuous decline in housing prices has led to the largest asset shrinkage for the public in nearly a decade. This trend has persisted until 2025 and shows no signs of improvement.
According to “The Wall Street Journal” on April 16, the latest data reveals another decline in residential sales prices in China in March.
Compared to the same period last year, average residential sales prices in major Chinese cities fell by 5.0% in March, slightly better than the 5.2% decrease in February. Among 70 major cities, 68 reported a year-on-year decrease in residential sales prices, consistent with February.
Data from the National Bureau of Statistics shows that in March, 41 cities experienced a month-on-month decrease in residential sales prices, compared to 45 cities in February.
Faced with uncontrollable economic downturns and falling housing prices, the Chinese government has taken a “hands-off” approach, allowing for lackluster market conditions.
According to data released by China Real Estate Network, in 2024, an increasing number of Chinese cities have stopped price controls on new residential properties, allowing developers to independently price and sell housing units.
According to incomplete statistics, at least 18 cities have lifted or relaxed restrictions on housing prices.
As housing prices spiral out of control and more homebuyers are unable or unwilling to repay loans, banks holding real estate assets as collateral are under tremendous pressure.
Firstly, plummeting property values lead to a devaluation of collateral, while defaulting buyers and abandoned construction projects result in substantial loan losses for banks.
Secondly, during the property boom, banks re-lent against mortgage assets. The current widespread economic downturn risks breaking the financing chain for banks. The only hope lies in central bank intervention through monetary injection, but this would only worsen the situation.
Therefore, a real estate crisis is bound to lead to a banking crisis.
Professor Xie Tian from the University of South Carolina previously analyzed this issue and told NTD Television that China’s economic downturn may persist, leading to a financial tsunami and more bank closures in the future, as this becomes a major trend.
As China’s economic data reveals crisis and the inability to justify falsified figures, the CCP has ceased releasing hundreds of economic indicators. This makes analyzing China’s economic situation and accurately predicting the severity and timing of a crisis even more challenging.
According to “The Wall Street Journal” on May 5, their analysis shows that Beijing has stopped publishing hundreds of data points that had been used by researchers and investors. Without providing any explanation, these data points have suddenly vanished.