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China’s banks excel but economy stutters

While China’s biggest banks have held on to their places at the head of the Top 1000 ranking, the country’s economy is showing signs of strain. 
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China’s banks excel but economy stutters

China’s four megabanks have dominated The Banker’s Top 1000 yet again, easily remaining in front as the world’s largest banks by Tier 1 capital. Top-placed Industrial and Commercial Bank of China has surpassed the half-a-trillion dollars in Tier 1 capital landmark, a first in the ranking. And with Bank of Communications joining the top 10, half of the largest banks in the world are now Chinese.  

For the country’s biggest banks, the impact of the pandemic seems to have barely left a mark. In addition, digital-only banks have thrived under lockdowns as China, like other nations, embraced digital technology at an accelerated pace. WeBank and MYBank have both seen strong results in 2021. And fellow online financial institution, XW Bank, saw the highest return on assets of the 155 banks which appear in the ranking. 

This strong performance in the Chinese banking sector comes in contrast with the difficulties being experienced across the economy. The continued lockdowns, as the country continues to pursue its dynamic zero-Covid-19 goal, have hurt manufacturing, supply chains and consumer confidence. While China aims for a targeted 5.5% gross domestic product growth in 2022, economists and analysts are less optimistic, with forecasts ranging from 4.2% to 3.5%. With increased downside risks of another city-wide lockdown like that seen in Shanghai in early 2022, some caution economic growth could fall even lower. 

Even with the lockdowns easing, several issues remain unresolved. Unemployment levels in major cities remain high: above 18% among 16- to 24-year-olds. The widely reported issues in the property sector may also push down economic activity. Evergrande’s defaults made headlines as a Global 500 company and one of the largest property developers in China, but several other smaller developers have also experienced financial problems, which have in turn been passed on to the wide-ranging supply chain of affiliated companies that have not received payments. 

While the biggest, systemically important banks are protected, the smaller rural and city banks are more exposed to economic shocks. The 2023 Top 1000 World Banks ranking will show just how badly these banks have been hit. 

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Read more about:  Analysis & opinion , Asia-Pacific , China