China’s credit reshuffle aims to squelch risk, restore confidence as recovery lags

As financial risk prevention has become an ‘eternal theme’, policymakers have been urged to de-risk local systems to preserve economic growth

While mulling small bank mergers and local debt rollovers, China’s central bank governor called property risks ‘controllable’ ahead of a key tone-setting conference

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Some 40 billion yuan (US$5.6 billion) at four rural banks in the province, as well as one in neighbouring Anhui, was tied up in the Henan banking crisis last year. Photo: AFP

Published: 11:00pm, 4 Dec 2023Updated: 9:19am, 5 Dec 2023

China’s top leaders are expected to assemble at the central economic work conference in Beijing this month to hammer out economic goals for 2024. This is the second part in a series looking at what to expect from China’s economy next year.

Over a year after a cash crisis triggered rare protests by depositors in the central Chinese province of Henan, a major financial overhaul has been rolled out: around 130 small rural lenders, previously scattered across the province, have been consolidated into a single entity to maximise oversight and minimise systemic weaknesses.

The Henan Rural Commercial United Bank, with registered capital of 6 billion yuan (US$847.2 million) when it was launched in October, is the fourth institution of its kind to be set up as part of reforms to the rural credit system. It has been tasked with acting as “a ballast stone” to guard against financial risks, according to state media.

Last year’s crisis involved some 40 billion yuan at four rural banks in the province, as well as one in neighbouring Anhui.

Several senior financial officials and rural lenders were placed under investigation as a result, and a criminal gang was arrested. In the aftermath, Beijing issued an order to crack down on financial crimes and maintain social stability.

Henan’s reshuffle comes at a time when President Xi Jinping reconfirmed financial risk prevention as an “eternal theme” at the end of October.

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What to expect from China’s economy in 2024

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