Three prefectures in Qinghai plan to form prefecture-level unified legal person rural commercial banks

Several rural commercial banks across Huangnan, Hainan, and Haibei prefectures in Qinghai Province have simultaneously released notices for extraordinary shareholder meetings, proposing to deliberate on resolutions to establish prefecture-level unified legal entity rural commercial banks. This move signals that Qinghai's rural credit cooperative system is advancing its "prefecture-level unified legal entity" reform into sparsely populated, network-dispersed pastoral areas with large service radii.

Compared with reforms in Sichuan, Guizhou, and Xinjiang, Qinghai's approach 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—Huangnan, Hainan, and Haibei—differ significantly from the Haidong river valley and the area surrounding the provincial capital, Xining. Their pastoral area outlets, smallholder farmers, and cooperative credit extension radii are considerably longer. Following the shareholder meetings, the critical steps will be determining the base date for asset verification, allocating net assets, and preserving the agricultural lending authority of sub-branches.

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

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

On April 22 of this year, Haidong Rural Commercial Bank was officially挂牌 (listed/established). 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% equity) and 32 legal person shareholders (holding 53.15% equity). 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 is the "first case in Qinghai" implementing the policy to "reduce quantity and improve quality" among small and medium-sized financial institutions, aiming 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 slated for merger within its jurisdiction: Xining, Datong, Huangzhong, and Huangyuan. This marks the entry of Xining's prefecture-level rural commercial bank establishment into a substantive operational phase.

The current announcements by multiple rural commercial banks in Huangnan, Hainan, and Haibei prefectures to convene extraordinary shareholder meetings to review resolutions on establishing prefecture-level unified legal entity rural commercial banks indicate that prefecture-level administrative units are being incorporated into the unified legal entity framework. Public materials show 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 already 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 aspects:

1. 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.
2. Capital Consolidation: After capital consolidation, it must be determined whether the new entity's capital adequacy, provisions, and liquidity positions are designed based on the weakest institution within the prefecture, rather than the average.
3. Information Systems and Outlet Responsibilities: It must be decided whether information systems and outlet accountability will be retained down to the township and village levels.

The analyst warned that if only equity is centralized without reforming credit authorization, county-level agricultural loans could be inadvertently harmed by the head office's concentration limits. He recommended that during the preparatory phase of prefecture-level rural commercial banks, the classification of agricultural clients, single-client limits, and green channels for each sub-branch should be written into internal control manuals to prevent excessive centralization of county-level authority after the merger.

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

On September 14, four rural commercial banks in Sichuan, including Luxian 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 its prefecture-level unified legal entity reform. Sichuan's reform approach was spearheaded by the Sichuan Rural Commercial United Bank, established in early 2024, following a "province invests in city, city merges county" path, where the provincial platform first invests in the city-level banks, which then merge the county-level ones.

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 reform of Guizhou's rural credit cooperatives generally follows "two steps": 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 preparatory work for banks in Guiyang, Tongren, and other cities has also started.

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 prefectures (Aksu, Kizilsu, Hotan, and Kashgar), and then advancing the establishment of a unified legal entity rural commercial bank for the entire region. Guangxi's Laibin Rural Commercial Bank was established in December 2025 by absorbing and merging five rural cooperative institutions to form a city-level unified legal entity, increasing its registered capital from 259 million yuan to 1.198 billion yuan. The Guangxi Rural Commercial United Bank uses a "top-down investment" model to invest in multiple rural cooperative institutions across the region. In May 2026, Shangrao City in Jiangxi Province initiated preparatory work for a "12-into-1" unified legal entity merger of 12 rural commercial banks within its jurisdiction. At the provincial level, Jiangxi received approval in January 2025 to prepare for the establishment of Jiangxi Rural Commercial United Bank. In February 2025, the Jiangsu Provincial Government issued a notice to restructure the Jiangsu Provincial Rural Credit Cooperative Union into Jiangsu Rural Commercial United Bank, but did not designate prefecture-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 entities 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 reform adopted a regional-first, then province-wide approach, considering business homogeneity and management radii across prefectures. Jiangsu's preference for a united bank model suggests that in the eastern region, where rural commercial banks are numerous and individually strong, full centralization may not be suitable. If Qinghai's rural credit reform simply copies the administrative rhythm of "city merges county," it may underestimate the characteristics of pastoral area institutions, such as small individual loan 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 along administrative divisions.

How Can Agricultural Services and Risk Management Improve After Rural Commercial Bank Mergers?

It is noteworthy that the Rural Small and Medium Banks Supervision Department of the National Financial Regulatory Administration has repeatedly advocated for a "one province, one policy" approach to rural credit cooperative reform, explicitly requiring the restructuring of provincial credit unions into financial enterprises with clear property rights and responsibilities, creating a system that combines centralization and decentralization with multi-level operations. Simultaneously, the department has clearly emphasized 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" in publications like China Rural Finance.

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

1. Capital Adequacy and Provision Coverage: After asset verification, capital adequacy ratios and provision coverage rates should be recalculated based on post-consolidation stress tests, rather than using the old values of the original individual banks.
2. Regulatory Reporting Continuity: After original county-level banks become sub-branches, regulatory reporting channels for agriculture, small and micro enterprises, poverty-alleviated areas, and cooperatives must not be interrupted, to avoid "data distortion after merger."
3. Shareholder Transparency: Shareholder due diligence 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-level bank to sub-branch risk warning system, managing assets with different cyclical characteristics—such as pastoral livestock, caterpillar fungus, photovoltaic poverty alleviation projects, and cold chain logistics—in separate pools.

The analyst 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. Instead, it could consider incorporating "number of outlets per 10,000 square kilometers," "number of credit accounts per 10,000 farming and pastoral households," and "coverage rate of basic financial services at the township level" as hard performance indicators. Otherwise, as capital grows and the number of institutions shrinks, the balance sheet may look better, but remote townships could see a rapid replacement of services by self-service terminals, potentially lengthening the "last mile" of credit access for the elderly, cooperatives, and family farms. For regulators, it could also be considered to require 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 rhetoric of serving agriculture, rural areas, and farmers.

(Source: National Business Daily)