China Consolidates Rural Lenders, Eyes Financial Risks
• China is consolidating small rural lenders into larger entities to increase oversight and minimize risks, as seen in Henan province where 130 banks now form a single rural commercial bank
• Financial risk prevention remains a top priority for China's leadership, especially regarding small banks, local government debt, and the property sector
• Reported asset quality metrics may underestimate risks, due to factors like forbearance on property loans and off-balance sheet exposures
• Property-related risks are seen as manageable for now, but a sharp, lasting decline in prices could spiral into a vicious cycle
• Beijing may need to play lender of last resort to rescue major developers to restore confidence, as delays in home deliveries could become a social issue