With the rapid decline of the Chinese economy, mainland banks, once the most profitable industry, have entered a period of decline. Not only are high-ranking officials taking pay cuts and employees facing layoffs, but also due to shrinking net interest margins, bank profits continue to slide downward. Many banks are caught in a liquidity trap. To cover up the true predicament of the banks, maintain liquidity, and prevent fraud, the Chinese Communist Party is taking all means to restrict depositors from withdrawing money. The difficulty of withdrawing money from banks has become the actual experience for customers conducting transactions at banks.
Furthermore, large amounts or even huge sums of deposits from depositors have mysteriously disappeared from banks across the country, reportedly taken by bank staff. When confronted by depositors, the banks deflect responsibility, claiming that it was the individual actions of specific employees and temporary workers, and they have no association with the bank. When depositors sue the banks, the Chinese Communist Party rules in favor of the banks, essentially allowing the banks to rob depositors and leaving the depositors with no place to seek justice.
The court ruled that the bank’s robbery was legal. This is not an isolated incident but a common occurrence in mainland banks. Let’s take a look at the case of Industrial and Commercial Bank of China (ICBC) in Nanning, Guangxi, where 250 million yuan in deposits mysteriously disappeared.
On the morning of July 15th, the two parties involved in the highly publicized ICBC “250 million yuan deposit disappearance” case exchanged evidence at the Qingxiu District People’s Court in Nanning. The plaintiff provided 36 sets of evidence to the court, proving that the bank had made significant mistakes. The ICBC’s legal representative submitted 9 sets of evidence to the court, proving that the bank’s procedures were compliant and that the back of the deposit certificate alerted to risks, stating that the depositor’s losses were the result of criminal activity, not the bank’s fault.
The origin of the case goes as follows: on May 21, 2019, a woman named Shi confessed to the police that she was the personal assistant of Liang Jianhong, a senior executive at ICBC’s Nanning Branch. At Liang Jianhong’s behest, she repeatedly forged large deposit certificates, exchanged them with the depositors’ genuine certificates, and then secretly transferred the depositors’ money. The next day, Liang Jianhong was arrested by the police.
During the period from September 2018 to May 2019, Liang Jianhong deceived clients with idle funds to make large deposits at ICBC under the pretext of “contributing deposits to lending businesses,” promising additional monthly returns of 2% on top of the normal bank interest.
By coordinating with an accomplice within the bank, Liang Jianhong swiftly carried out the entire crime in less than an hour, meaning that customers’ funds deposited at ICBC were transferred by Liang Jianhong within an hour, while the victims were completely unaware. Through this modus operandi, Liang Jianhong and Shi managed to steal a total of 253 million yuan from the deposit certificates of 28 victims, with a portion of the funds returned before the incident but still 1.2 billion yuan remained unrecovered.
On November 19, 2021, the Nanning Intermediate People’s Court sentenced Liang Jianhong to life imprisonment in the first instance. However, the judgment stated that whether Liang Jianhong’s former unit had any responsibility was beyond the scope of this trial and would not be judged. On March 18, 2022, ICBC Guangxi stated that the judicial determination found that Liang’s actions were individual criminal acts and not acts of embezzlement. The bank operated in compliance with the law and bore no responsibility.
Following the bank’s statement, public opinion stirred. The focus of the case was on Liang Jianhong’s arrest in May 2019 on suspicion of embezzlement. If this were the case, the bank would not escape responsibility. However, during the prosecution, the charges were changed to theft, fraud, and forgery of financial instruments. In court, Liang Jianhong argued that the victim was well aware of her personal life and work experience and knew she was the General Manager of the Personal Financial Business Department at ICBC’s Nanning Branch. The victims deposited their money based on her identity, and Liang Jianhong used her status to quickly handle the transfer and withdrawal of deposit funds, believing her actions should be considered as embezzlement.
Representatives of the victims’ legal team argued that the essence of theft crimes is clandestine theft. However, based on Liang Jianhong’s entire criminal process, there was no clandestine theft. The substitution of deposit certificates, using depositors’ identities, and withdrawals were all carried out by Liang Jianhong exploiting her power and influence. Without utilizing her power and influence, the consequences of deposit theft could not have occurred, thus should be classified as embezzlement.
In fact, bank deposit disappearances are not a new phenomenon. In 2013 to 2015, cases involving the theft of 100 million yuan from Jiugui liquor, the disappearance of 500 million yuan from Luzhou Laojiao, the disappearance of 95.05 million yuan from 42 depositors in 2014, cases of missing billions from a bank in Hangzhou, 300 million yuan vanishing from Hezhong Life Insurance, and 150 million yuan missing from 22 depositors, have been reported. Such cases have become more prevalent in recent years.
In 2019, a woman named Ji from Pingdingshan, Henan Province, discovered that 1.2 million yuan had disappeared from her account when she tried to withdraw money from the bank, and she even owed the bank 130,000 yuan, shocking many. In October 2024, a depositor in Zibo, Shandong Province, deposited 400,000 yuan into a local branch of Qishang Bank, only to have it withdrawn without her knowledge the same day. Such incidents prompt banks to issue disclaimers immediately, and the lawsuits of the victims rarely result in victories.
In the current economic downturn, peculiar banking phenomena extend beyond difficulties in withdrawing money and deposit disappearances. In recent years, small and medium-sized banks across the country have been closing down in a domino effect, adding to the grim landscape of economic hardship and decline under the Chinese Communist Party.
According to reports from several Chinese media outlets, data shows that since 2025, a total of 210 small and medium-sized banks nationwide have been dissolved or merged, exceeding the total number for the entire year of 2024. The disappearance of these banks accounts for approximately 5% of the total number of banks. Analysts believe that the pace of bank dissolution this year has accelerated compared to the previous year, and it is expected to speed up further in the second half of the year.
Among these 210 closed banks, there are 62 rural commercial banks, 88 rural cooperative banks, 55 credit cooperatives, 2 rural mutual aid funds, and 3 rural cooperative banks. This means that small and medium-sized banks are the first to bear the brunt of impacts amid the economic recession.
As the Chinese Communist Party steers towards economic collapse and the collapse of the real estate industry, systemic financial risks in China are nearing a critical point. Concurrently, China’s population has been in negative growth since 2022, and the number of deaths from three years of pandemics remains a mystery. The emergence of numerous ghost villages nationwide has prompted the Communist Party to initiate waves of village-town merger movements in rural areas. These factors, combined, have led the Communist Party to proactively merge village-town banks from a national perspective.
Therefore, the pace at which small and medium-sized banks are disappearing is accelerating. Between 2022 and 2024, the number of small and medium-sized banks that were merged was 43, 77, and 204, respectively. Village-town banks constitute the majority of the banks being merged.
By the end of 2024, there were a total of 4,295 bank financial institutions in China, a reduction of 195 from the end of 2023. Looking at the types of financial institutions, rural commercial banks, rural credit cooperatives, and village-town banks each decreased by 44, 41, and 98, respectively, compared to the previous year. People’s Bank of China data shows that as of the end of March 2025, the number of bank financial institutions in the country decreased by 48 compared to the end of 2024, with village-town banks taking the largest hit.
However, the root cause of the closure of small and medium-sized banks lies in the economic downturn, as their ability to withstand risks has shown weaknesses. According to statistics, among 341 village-town banks that disclosed their financial data for 2024, 231 banks had a profit of less than 10 million yuan, with nearly 70% just breaking even, and 70 banks recorded losses, including 19 that had been in the red for two consecutive years.
The closure of small and medium-sized banks is closely linked to the downturn in the real estate sector. For the past two to three decades, China’s real estate sector has essentially been a cash cow for local governments, with land sales revenues accounting for nearly half of local government finances. The primary clientele of most small and medium-sized banks are local state-owned enterprises, local urban development corporations, and real estate developers in the area.
For example, the Shanghai Agricultural and Commercial Bank’s largest loan industry sector is real estate, accounting for 26.6% of public loans, followed by leasing and business services (mainly targeting local urban investment), accounting for 20.1%.
Looking at the entire listed bank sector, the real estate sector poses a much greater risk than other industries. The real estate non-performing loan ratio for listed banks is as high as 3.47%, exceeding the overall non-performing loan ratio by 2.12 percentage points. According to data from the China Banking and Insurance Regulatory Commission, in the first quarter, the loan loss provision coverage ratio for rural commercial banks was 152.64%, lower by 94.54, 59.68, and 31.29 percentage points compared to large commercial banks, joint-stock banks, and city commercial banks, respectively. Under high non-performing loan rates and low loss provision coverage rates, small and medium-sized banks have become the most unstable factor in the banking system.
In mainland China, the shareholder structures of small and medium-sized banks are relatively complex, involving private enterprises and even individuals. As a result, from the perspective of equity structure, capital size, reputation, and competitiveness, small and medium-sized banks are far from being able to compete with state-owned banks. State-owned banks are the lifeblood of the Chinese Communist Party and are too big to fail.
Even state-owned banks and major banks are experiencing dwindling net interest margins, with five banks including Agricultural Bank of China, Bank of Communications, Industrial and Commercial Bank of China, China Construction Bank, and Bank of China surpassing the danger line for net interest margins in 2024.
As the profitability of banks declines, bank branches are rapidly closing. According to statistics, more than 2,400 various bank branches closed in 2022. From January 1, 2023, to December 22, 2023, a total of 2,649 commercial bank branches announced closures. In 2024, a total of 2,483 commercial bank branches were approved to shut down nationwide.
According to reports, examining the financial reports of 2024, the overall revenue growth rate of the six major state-owned banks continued to decrease. Industrial and Commercial Bank of China and China Construction Bank had been experiencing consecutive declines in revenue for the past three years, with decreases of 2.5% and 2.54%, respectively. Postal Savings Bank of China has seen a slowdown in revenue growth since 2021, registering 1.83% in 2024. The revenue decline of Industrial and Commercial Bank of China and China Construction Bank is attributed to the decrease in interest income.
Amid the ongoing economic earthquake in China, the bank system is on the verge of collapse.
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