The number of small and medium-sized banks in China decreases: Analysis shows significant increase in financial risk.

In recent months, the number of small and medium-sized banks and financial institutions in China has been steadily decreasing, with a drastic drop of 40 institutions within just 7 days in June this year. Analysts in Taiwan have observed that the People’s Bank of China has been focusing its policy goals on supporting the real economy, but has neglected its responsibility to prevent financial crises or currency fluctuations, leading to an increase in financial risks.

To shed light on the economic risks and international challenges facing mainland China in 2024, the Chung-Hua Institute for Economic Research in Taiwan held the “2024 China Mainland Economic Risk International Challenges Forum” on the 14th. Associate Professor Zhang Hongyuan from the Department of International Trade at Cheng Shiu University of Science and Technology attended the forum as a speaker and panelist.

Zhang emphasized that the 20th Plenary Session of the CPC Central Committee highlighted the need to implement various measures to effectively prevent and resolve risks in key areas such as real estate, local government debt, and small and medium-sized financial institutions. Among these areas, the issue of chain bankruptcies facing small and medium-sized financial institutions is “very severe”.

He pointed out that the effectiveness of general monetary policies in addressing financial supply and demand issues post-pandemic has been completely lost. Currently, the People’s Bank of China (PBOC) has set its policy goal on supporting the real economy but has overlooked its duty to avoid financial crises or currency fluctuations.

Zhang further highlighted that the pressure of chain bankruptcies facing small and medium-sized financial institutions is increasing. Within the Chinese financial environment, bank closures lead to the fastest spread of financial risks.

Although it is challenging to directly pinpoint which financial institutions are at risk, Zhang suggested that external conditions can be observed to identify risk areas. For example, in some regions, the lending rates of small and medium-sized banks are equal to or even higher than those of large banks in major cities, indicating poor corporate credit in these regions. As a result, banks providing loans in these regions also carry risks, leading to the classification of these regions as “red zones” with high risk levels.

(Data source: Central News Agency)