Recently, China Cheng Xin International Credit Rating Co. Ltd. (CCXI) has revised the rating of a city commercial bank called Laishang Bank from stable to negative.

ANBOUND Consulting is of the view that this reflects the generally distorted relationship between the enterprises, local governments as well as the banks.

Against the backdrop of current economic situation, the market risk in the real economy, particularly those associated with the state-owned enterprises could be transmitted to the banks easily and hence increase the risk of systemic, regional financial risk.

The healthy development in the banking sector, particularly the small and medium sized banks, is achievable if and only if there is no intervention from the government and the distorted relationship between the banks and securities can be rectified.