Dec 12 (Reuters) – Many of China’s newly merged small banks have seen profits fall and capital buffers shrink over the past year, a Reuters review of data showed, testing Beijing’s record consolidation drive designed to avert risks in its $8 trillion small banking sector.

China’s bank consolidation has accelerated, with at least 350 banking licences cancelled in 2025 as of November, up from 198 in 2024, according to a report by Chinese ‍investment bank China International Capital Corp.

The consolidation mainly targets a sprawling network of more than 3,600 rural banks and credit cooperatives that account for about 14% of the country’s $58 trillion banking sector, according to official data.

These small banks are mainly backed by indebted provincial governments and are largely funded via

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