China’s regional banks tarnished by allegations of crimes, bad loans and excessive risk

The coronavirus pandemic and subsequent virus controls have taken a huge toll on regional finances and exposed scores of bad loans in the process

The province of Liaoning epitomises the precarious nature of China’s regional banking system after years of issuing loans with loose or no credit checks

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Protesters demand the return of their money in front of the Henan branch of the China Banking and Insurance Regulatory Commission in Zhengzhou city, central China’s Henan province. A cash crisis at four rural Henan banks highlights the vulnerability of rural lenders. Photo: Weibo

Published: 5:00am, 2 Jul 2022Updated: 5:56am, 2 Jul 2022

After more than a decade of freewheeling growth riding the winds of government stimulus, China’s small banks have become a financial burden for local authorities and the target of a national anti-corruption campaign.

The situation is especially severe in less developed regions, like Liaoning province, where the coronavirus pandemic and subsequent virus controls have taken a huge toll on regional finances and exposed scores of bad loans in the process.

Xiao Yuanqi, the vice-chairman of China Banking Insurance Regulatory Commission (CBIRC), said last week financial risks associated with small- and medium-sized banks (SMBs) were generally controllable, but “problems still exist” and some lenders are suspected of committing crimes.

A recent high-profile cash crisis at four rural banks in Henan has highlighted the vulnerability of rural lenders, but the central Chinese province is far from the exception.

The northeastern province of Liaoning epitomises the precarious nature of China’s regional banking system, and has been described by CBIRC as the area “hit hardest by financial risks”.