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The number of mergers and closures involving smaller banks in China has almost doubled this year compared to last year, driven by rising market competition and significant shifts in the industry landscape due to advancements in financial technology. Since the beginning of the year, approximately 377 small Chinese financial institutions have either merged or shut down, up from 195 for the entire previous year, according to data from a financial information platform. Additionally, over 9,000 physical bank branches have closed in 2025.
Of these 377 institutions, 218 were village banks, many of which have merged into larger financial entities. For example, Qian’an Xianglong Rural Commercial Bank in Hebei province merged with Bank of Tangshan on November 28. The remaining closures included 79 rural commercial banks and 70 rural credit cooperatives.
Inner Mongolia has seen the highest number of deregistrations among China’s provincial regions, with 139 small banks closing. This trend is mainly due to extensive integration within the area’s rural credit system. On May 17, the Inner Mongolia Rural Commercial Bank was established, integrating 120 rural credit cooperatives and village banks across the region. Other provinces such as Sichuan, Shandong, and Henan each saw more than 20 lenders deregistered.
The primary driver behind the rising number of small bank closures is risk management. The 2024 China Financial Stability Report highlights that 357 lenders, primarily rural cooperative and village banks, are categorized as high-risk. To mitigate this risk, eleven regional authorities have established rural commercial or joint rural commercial banks, aiming to consolidate local small and medium-sized lenders and reduce operational risks.
In addition to bank closures, the number of bank branches approved for shutting down exceeded 9,661 as of yesterday—more than triple the amount from last year. Data from the national financial licensing authority show that this includes around 5,400 branches of rural commercial banks and 962 branches of state-owned banks, while city commercial and joint-stock banks have a comparatively smaller number of closures.
The rapid growth of fintech has transformed banking operations, allowing most daily activities—such as money transfers, payments, financial product purchases, and loan applications—to be completed online or via mobile devices, a technology executive in southern China explained. He observed that over 80% of everyday banking transactions can now be managed digitally.
Cost savings are a significant factor in this shift. Maintaining a physical branch costs between CNY 2 million and CNY 5 million annually, covering rent, utilities, and equipment, with total expenses approaching CNY 10 million including staffing. Online banking operations, by contrast, cost only about one-tenth of that amount.
Industry insiders note that branch closures are unlikely to adversely affect customer experiences significantly. These adjustments aim to address overextended networks and inefficiencies in certain areas, streamlining banking services without compromising customer access.
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