Chinese banks more resilient as $110b injection and reforms take hold

Reforms and consolidation will strengthen its rural banking sector, S&P said.

China’s banks are now more resilient to economic downturns thanks to the country's technological advances, significant financial reserves, and diversified economy, said S&P Global Ratings.

Credit losses in a downside scenario will be manageable for the banking sector, the credit rating company said in a report on September 2026.

“Ongoing reforms and massive consolidation should lead to a stronger rural banking sector, with better-funded shareholders and increased accountability, reducing tail risk in the sector,” S&P said.

Beijing’s capital injection of about $110b into state-owned banks and insurers over 2025 to 2026 will smooth the path for the country’s economic transformation despite ongoing economic and geopolitical conditions, S&P said.

Loan growth is expected to decline to mid-single digit levels in 2027, however, compared to an 11% growth in 2023.

Property development loans in China will fall to less than 5% of the banking sector’s loans by 2027, S&P said.

Incremental strains from loans to property developers, small businesses, and unsecured consumers are likely to be manageable, it added.

The commercial banking sector’s nonperforming loan, weak loan, and credit loss ratios will remain broadly stable at 1.6%, 5.2% and 0.65%, respectively, over the next two years.