Chinese banks' profitability to stabilise as margin pressure eases

Stable policy rates and less intense funding will alleviate pressure, said S&P Global Ratings.

Profitability in China’s banking sector is expected to stabilise, with stable policy rates and easing competition alleviating margin pressure, said S&P Global Ratings.

“Broadly stable policy rates and less intense pricing competition amid China's "anti-involution" drive will alleviate pressure on net interest margin,” the credit rating company said in a report on 16 September 2026.

For rural banks, ongoing reforms and massive consolidation should lead to a stronger sector, with better-funded shareholders and increased accountability, S&P said. This reduces tail risk in the sector.

The banking sector’s strengths include a diversified deposit base, and its broad and deep domestic capital market.

The system benefits from low gross external debt and high domestic savings, which provides a stable source of liquidity and reduces the system's vulnerability to external shocks and global market volatility, S&P said.

China's regulators are said to have a good record of preemptively unwinding risks and managing shocks to the system, S&P said.

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