# Second Round of 300 Billion Yuan Capital Injection into State-Owned Major Banks Plan Finalized - What About More Small and Medium-Sized Banks? Industry: It Depends on Local Financial Capacity

Financial Associated Press, March 12 — (Reporter Guo Zishuo)

The 2026 Government Work Report explicitly states “increase capital replenishment through multiple channels,” with plans to issue 300 billion yuan in special national bonds to support the capital augmentation of large state-owned commercial banks. This is the second round of large bank capital injections, following the 500 billion yuan special bond infusion into four major state-owned banks in 2025.

However, publicly available data shows that compared to large state-owned banks and nationwide banks, the capital gap among small and medium-sized banks is actually more pronounced. During this year’s Two Sessions, Liu Yasheng, a National People’s Congress deputy and president of the Beijing branch of the Export-Import Bank of China, stated that the core Tier 1 capital adequacy ratios of some city commercial banks and rural commercial banks are nearing red lines, and urgent support through special bond issuance and other means is needed.

According to the State Financial Regulatory Administration, at the end of Q4 2025, the average capital adequacy ratios of city commercial banks and rural commercial banks were 12.39% and 13.18%, respectively, below the industry average of 15.46%. Meanwhile, asset quality pressures are more severe among small and medium-sized banks. During the same period, the industry average non-performing loan ratio for commercial banks was 1.5%, while city commercial banks and rural commercial banks were at 1.82% and 2.72%, respectively, both above the industry average. Some institutions face capital pressure alongside asset quality challenges.

With state-owned large banks receiving fiscal injections, what about other banks, especially small and medium-sized banks? Li Yunze, director of the National Financial Regulatory Administration, recently stated that besides issuing special national bonds at the central level, more social funds can be mobilized through market-based approaches, such as exploring insurance funds and other channels.

For small and medium-sized banks, is increased participation of social funds the key to unlocking their capital replenishment? What specific policies are industry insiders expecting? With these questions in mind, Financial Associated Press reporters recently engaged in in-depth discussions with several frontline banking professionals, receiving clearly differentiated answers.

Shareholder willingness and capacity to invest are constrained

Public data shows that since 2026, over 80 small and medium-sized banks have completed capital increases, mostly led by local state-owned assets, highlighting a distinct local government-led characteristic.

A representative from an East China city commercial bank told Financial Associated Press that the core difference in capital replenishment between city commercial banks and large state-owned banks lies in the source of funds. “Large banks’ capital comes from central government finances, while city and rural commercial banks mainly rely on local governments, local state-owned assets, and private shareholders,” he said. He bluntly added that with net interest margins at historic lows and “landlords having no surplus,” both willingness and capacity to continue investing are limited.

“We are also waiting for notices,” he said. Currently, most peers are observing, and it’s unclear when specific policies will be implemented.

Additionally, he expressed caution about the proposal to “leverage social funds”: “Who pays determines whether and how to replenish capital. Profitability is generally declining now, so large-scale implementation is unlikely.”

Another East China city commercial bank professional revealed that they are “reporting to and seeking support from local authorities,” but ultimately whether policies will materialize depends on local investment willingness and fiscal strength—“the key is financial capacity.”

Capital replenishment may become a burden; mergers and restructuring could be a solution

Financial Associated Press also learned that not all small and medium-sized banks are eager to “raise blood.”

Industry insiders believe that for small and medium-sized banks, “raising blood” is not the goal; sustainable profitability is fundamental. In the context of weak credit demand and narrowing interest spreads, additional capital may become a management burden.

A representative from an East China rural commercial bank clearly stated that the key to capital replenishment is whether each bank truly has a capital shortfall. “Currently, overall credit demand is weak. If capital is passively replenished without effective channels for deployment, it could increase operational burdens,” he explained. He further clarified that shareholders expect returns through dividends, and “without sufficient profits, dividend capacity will be limited, and capital replenishment could dilute existing shareholders’ equity.”

He believes there is significant differentiation in capital needs among banks. “Some banks, due to historical bad asset write-offs, face capital pressure. But well-managed banks with good asset quality, especially leading institutions, currently do not have urgent capital needs.”

Financial Associated Press noted that recently, when responding to investor questions, Suzhou Bank stated that as of the end of September 2025, the group’s core Tier 1 capital adequacy ratio was 9.79%, meeting regulatory requirements. The bank will “closely monitor refinancing policies, continuously optimize business structure, improve capital efficiency, and strive for steady endogenous capital growth.”

Some interviewees suggest that, given the current environment, for small and medium-sized banks that need capital, promoting mergers and restructuring might be a better option than simply raising capital.

The East China rural commercial bank professional mentioned that “for small and medium-sized banks burdened with bad assets, only through mergers and restructuring can sustainable development be truly achieved.” However, he also admitted that this approach involves multiple stakeholders and is currently limited to “case-by-case” situations, with no systematic policy push yet. “This is not top-level design; it remains a local-level game.”