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China Has ‘High’ Chance of Small Bank Failure, Official Says

One or two small Chinese banks may fail next year as they face pressure from their reliance on short-term borrowing, a Communist Party economic official said.

Small banks get about 80 percent of their funding from interbank markets and deposits in savings vehicles known as wealth management products, Fang Xinghai, a bureau director at the Central Leading Group for Financial and Economic Affairs, said at a conference in Beijing today. They face risks from the mismatch with their long-term loans to borrowers such as local-government financing vehicles, he said.