Three prefectures in Qinghai plan to form prefecture-level unified legal person rural commercial banks, deepening reform in pastoral areas

Several rural commercial banks across Huangnan, Hainan, and Haibei prefectures in Qinghai Province have simultaneously announced extraordinary shareholder meetings to deliberate on proposals for establishing prefecture-level unified legal entity rural commercial banks. This marks a further push by Qinghai's rural credit cooperative system to implement "prefecture-level unified legal entities" in sparsely populated, network-dispersed pastoral areas with large service radii.

Compared with reforms in Sichuan, Guizhou, and Xinjiang, Qinghai's rural credit reform path represents a "multi-prefecture, low-density" model. The balance between consolidation costs and agricultural service provision in this context warrants separate analysis.

For Qinghai, the three prefectures of Huangnan, Hainan, and Haibei differ significantly from the Haidong river valley and the area surrounding the provincial capital Xining. Their pastoral area branches, smallholder farmers, and cooperative credit extension radii are considerably longer. Following the shareholder meetings, the critical issues will be determining the base date for asset verification, the allocation of net assets, and the retention of agricultural lending authority at the branch level.

Image source: Announcement by Qinghai Henan Rural Commercial Bank Co., Ltd. regarding the convening of its first extraordinary shareholders' meeting in 2026

Qinghai's Three Prefectures Launch Prefecture-Level Rural Commercial Bank Establishment: Asset Verification as Primary Hurdle

On April 22 of this year, Haidong Rural Commercial Bank was officially挂牌. The bank was formed through the merger of five rural commercial banks—Haidong, Huzhu, Minhe, Hualong, and Xunhua—via a new establishment method. The Qinghai Financial Regulatory Bureau approved a registered capital of 1.006 billion yuan, comprising 934 natural person shareholders holding 46.85% of shares and 32 legal person shareholders holding 53.15% of shares. Its positioning remains focused on serving agriculture, rural areas, and farmers ("sannong"), small and micro enterprises, county economies, and communities. According to a report by Qinghai Daily, the establishment of Haidong Rural Commercial Bank represents the "first case in Qinghai" of implementing the "reduce quantity, improve quality" policy for small and medium-sized financial institutions, intended to create a replicable model for the entire province.

Earlier, in early April, Xining City initiated a procurement tender for intermediary pre-assessment services, conducting asset verification and valuation for four rural commercial banks within its jurisdiction slated for merger: Xining, Datong, Huangzhong, and Huangyuan. This marks the entry of the Xining city-level rural commercial bank establishment into substantive operational stages.

The current announcement by multiple rural commercial banks in Huangnan, Hainan, and Haibei prefectures to convene extraordinary shareholder meetings to deliberate on proposals for establishing prefecture-level unified legal entity rural commercial banks signifies the inclusion of prefecture-level administrative units within the unified legal entity framework. Public materials indicate that Huangnan, Hainan, and Haibei prefectures each have 4, 5, and 4 locally incorporated rural commercial banks respectively. Guoluo and Yushu rural commercial banks have previously been operating as prefecture-level unified legal entities. If the new prefecture-level unified legal entity rural commercial banks in Huangnan, Hainan, and Haibei are successfully established, Qinghai's city- and prefecture-level unified legal entity rural commercial banks will cover a larger area.

A senior banking research analyst from Northwest China believes the difficulty in integrating prefecture-level rural commercial banks lies in consolidating three key financial statements:

• Asset verification: Pastoral area institutions have small asset scales, few collateral assets, and historical non-performing loans and shareholder qualifications must be reviewed institution by institution.
• Post-consolidation capital: Whether the new legal entity's capital adequacy, provisions, and liquidity positions should be designed based on the weakest institution within the prefecture rather than the average institution.
• Information systems and branch responsibilities: Whether these should be retained down to the township and village levels.

The analyst warned that if only shareholding is centralized without reforming credit authorization, county-level agricultural loans could be inadvertently harmed by the head office's concentration indicators. He recommended that during the establishment phase of prefecture-level rural commercial banks, agricultural customer stratification, single-customer limits, and green channels for each branch should be incorporated into internal control manuals to avoid overly aggressive centralization of county-level authority post-merger.

Comparison of National Rural Credit Reform Paths: Unified Legal Entity at Prefecture Level Not the Only Template

On September 14, four rural commercial banks in Sichuan, including Lu County and Xuyong, received approval for dissolution, marking the completion of the elimination of county-level independent legal entity rural commercial banks in Sichuan and the completion of Sichuan's city-level unified legal entity rural commercial bank reform. Sichuan's reform approach was anchored by the establishment of Sichuan Rural Commercial United Bank in early 2024, following a "province invests in city, city merges county" path, where the provincial platform first invests in city-level banks, which then merge county-level banks.

Guizhou has adopted a "provincial and city-level" two-tier reform path. In December 2025, Guizhou Rural Commercial United Bank was established. The Guizhou Provincial Financial Affairs Office stated at a press conference that the overall reform of Guizhou's rural credit cooperatives follows a "two-step" approach: first, restructuring the provincial credit union into a united bank, and second, the united bank injecting capital from top to bottom to promote nine city-prefecture rural commercial banks, forming a "1 united bank + 9 city-prefecture banks" structure. Regarding the establishment of city-prefecture rural commercial banks, as of September 2026, Bijie, Qianxinan, and Liupanshui have been approved for establishment and have commenced operations, while establishment work for rural commercial banks in Guiyang, Tongren, and other cities has also been initiated.

Additionally, Xinjiang's rural credit reform has adopted a "step-by-step" strategy, first completing the establishment of prefecture-level unified legal entity rural commercial banks in the four southern Xinjiang prefectures (Aksu, Kizilsu, Hotan, and Kashgar), and then advancing the establishment of a province-wide unified legal entity rural commercial bank.

Guangxi's Laibin Rural Commercial Bank was established in December 2025 through the absorption and merger of five rural cooperative institutions to form a city-level unified legal entity, with registered capital increasing from 259 million yuan to 1.198 billion yuan. Guangxi Rural Commercial United Bank participates in multiple rural cooperative institutions through a "top-down shareholding" model.

Shangrao City in Jiangxi Province initiated the establishment of a unified legal entity in May 2026, merging 12 rural commercial banks within its jurisdiction into one ("12 into 1"). At the provincial level, the establishment of Jiangxi Rural Commercial United Bank was approved in January 2025.

The Jiangsu Provincial Government issued a notice in February 2025 to restructure the Jiangsu Provincial Rural Credit Cooperative Union into Jiangsu Rural Commercial United Bank, but did not designate city-level unified legal entities as the sole direction.

The aforementioned banking research analyst pointed out that prefecture-level unified legal entity rural commercial banks are not necessarily "bigger is better." Sichuan's elimination of county-level independent legal entity rural commercial banks relied on provincial capital providing a foundation and city-level risk boundaries being clearly defined first. Guizhou's "1 united bank + 9 city-prefecture banks" model emphasizes capital injection by the united bank rather than immediate full consolidation. Xinjiang's rural credit reform adopted a regional-first, then province-wide approach, considering business homogeneity and management radii across prefectures. Jiangsu's continued preference for a united bank model suggests that eastern regions, with numerous and individually strong rural commercial banks, may not be suitable for complete centralization.

If Qinghai's rural credit reform simply copies the administrative pace of "city merges county," it may underestimate the characteristics of pastoral area institutions, such as small individual customer sizes and weak seasonal cash flows. The analyst suggested considering the establishment of credit centers based on industrial belts within prefectures, rather than setting up head offices and branches strictly according to administrative divisions.

Post-Merger Quality Improvement: Agricultural Services and Risk Management

It is noteworthy that the Rural Small and Medium-Sized Banking Institutions Supervision Department of the National Financial Regulatory Administration has repeatedly advocated for a "one province, one policy" approach to advancing rural credit cooperative reform, explicitly requiring the restructuring of provincial credit unions into financial enterprises with clear property rights and responsibilities, creating a system combining centralization and decentralization with multi-level operations. Simultaneously, the department has clearly emphasized in publications such as China Rural Finance the reform direction of "mergers and acquisitions to reduce quantity and improve quality" and "reducing the number and levels of institutions, strengthening centralized and unified management."

Specifically for Qinghai's prefecture-level rural commercial banks, quantity reduction is only the first step. The banking research analyst believes quality improvement requires attention to at least four aspects:

1. Capital adequacy and provision coverage: Whether these are recalculated based on post-consolidation stress tests after asset verification, rather than沿用 the original values of individual banks.
2. Regulatory reporting continuity: After original county-level banks become branches, reporting channels for agriculture, small and micro enterprises, poverty-alleviated areas, and cooperatives must not be interrupted, avoiding "data distortion post-merger."
3. Shareholder transparency: Penetration checks on shareholders should be conducted upfront. In areas with a high proportion of natural person shareholders, it is particularly necessary to verify related parties, nominee shareholdings, and the boundaries of local fiscal capital injections.
4. Two-tier risk warning system: Consider establishing a prefecture-branch two-tier risk warning system, managing assets with cyclical differences—such as livestock, caterpillar fungus, photovoltaic poverty alleviation, and cold chain projects—in separate pools.

He further raised a less frequently discussed point: after the prefecture-level rural commercial bank becomes a unified legal entity, the board of directors should not only focus on the prefecture's total profit and non-performing loan ratio. Consideration could be given to incorporating "number of outlets per 10,000 square kilometers," "number of credit-granted households per 10,000 farming and pastoral households," and "basic financial services coverage rate at the township level" as hard performance assessment indicators. Otherwise, as capital grows and institutions become fewer, financial statements may look better, but remote townships could see excessively rapid replacement by self-service terminals, potentially lengthening the "last mile" of credit access for the elderly, cooperatives, and family farms. For regulators, consideration could also be given to requiring newly established prefecture-level banks to regularly disclose branch-level information, authorization lists, and the regional distribution of agricultural loans, using data to substantiate the commitment to serving agriculture, rural areas, and farmers.

(Source: National Business Daily)