China Closes Record 670 Banks in 2025 as Beijing Consolidates Financial System

China shut a record 670 banks in 2025 — roughly one in four domestic lenders — as Beijing consolidates its financial system into fewer, larger, better-capitalized institutions, according to a Fitch Ratings analysis cited by CNBC. Most closures involved small rural and regional banks, where Fitch flagged "poor asset quality, low capitalization and governance shortcomings," especially in less-developed regions. Rural banks' return on assets fell to 0.45% in the first half of 2026 from 0.56% five years earlier, while bad loans rose to 2.8%, above the 1.5% sector average. Fitch said the strains are geographically contained and unlikely to threaten the broader system, though structural weaknesses may persist near term. The closures come as GDP grew 4.3% in the second quarter of 2026, the weakest since 2022, and August industrial profit growth slowed to 4.2% year-on-year.