China’s Battered Banks Are Dodging Bailouts With Stealth Mergers
- Local governments are quietly merging weaker regional lenders
- 13% of China’s 4,000 small lenders are considered “high risk”
Photographer: Qilai Shen/Bloomberg
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China jolted markets in 2019 with three high-profile bank rescues that imposed losses on some investors. The appetite for experimenting with greater market discipline has been crushed by the coronavirus pandemic.
2020 has become the year of stealth rescues as authorities try to preempt bank failures and ensure stability for an industry at the forefront of cushioning the virus-induced economic slump. Local governments are identifying the weakest lenders among more than 4,000 rural and city banks, and drafting plans -- at the request of the cabinet -- to merge them into bigger and, hopefully, stronger banks, according to people familiar with the matter.