Small Banks, Big Politics: The Causes and Consequences of Bank Proliferation in China

Conventional wisdom holds that banking markets flourish where property rights are secure, the rule of law is strong, and the state keeps its hands off. China has none of these. Yet over the past three decades, the number of Chinese banks grew exponentially, and competition became fierce. Why? Adam Y. Liu argues that China’s banking sector is a market of the state, by the state, and for the state, and that its banking market grew not despite authoritarian rule but because of it. Liu is the author of “In Authoritarian Markets: The Politics of China’s Banking Explosion” (2026). Drawing on a deca…