China regional banks hold 26.4% of system assets amid consolidation

Regional banks accounted for 26.4% of China’s banking system assets at the end of 2025, as authorities continue efforts to mitigate risks among smaller lenders, according to S&P Global Ratings. Mega banks remain the dominant force in the sector, controlling 43.9% of total assets, while joint-stock banks hold 16.2%.

Consolidation of the regional banking sector is expected to continue, particularly targeting weaker institutions facing financial pressure. Recent examples include the acquisition of Jinzhou Bank by Industrial and Commercial Bank of China Ltd. in 2025 and the regulatory takeover of Wuhan Zhongbang Bank in 2026. Additionally, hundreds of village and township banks have been consolidated or deregistered in recent years.

High-risk regional banks, categorized in the regulatory ‘red zone’, represent approximately 2% of banking system assets. Many of these institutions have historical ties to local governments and have traditionally lent to property developers and local government financing vehicles—sectors currently facing pressure from high debt and a weak property market. As China shifts its economic focus toward advanced manufacturing and technological development, S&P expects credit profiles across regional banks to become increasingly varied.