China is initiating a vast consolidation in its banking sector, planning to merge numerous rural lenders into regional powerhouses to combat financial instability. This move follows previous mergers in at least seven provinces since 2022, targeting the USD6.7tr rural banking sector. With a bad-loan ratio of 3.48% at the end of 2022—double the sector’s average—China aims to alleviate pressures from a struggling real estate market and a fragile economy. The consolidation, also politically motivated by protests in Henan province over a banking scam, is part of China’s broader strategy to secure financial stability by addressing risks through mergers and reorganisations, according to experts like Liu Xiaochun from the Shanghai Finance Institute.