With the economy in the doldrums, the small and medium banks in China are struggling.

The research team at ANBOUND Consulting is of the view that as the number of small and medium banks continues to grow, under the L-shaped economic trend; they are likely to run into minefield.

Despite the sluggish economy, the small and medium banks in China are still expanding. Although the overall supply of financial services in China is insufficient, the overly similar services have resulted in excessive competition and generally, this leaves the late comers in a less favorable position.

The business development of the small and medium banks are oriented towards 'virtualization' – they are shifting away from providing financing services to real economies towards the derivative business with the view of maximizing return of investment.

In terms of bill-financing business, the role of small and medium banks is mainly as bridging banks.

Small and medium banks have limited management capability and their knowledges on the risks associated with innovative business are limited by their geography. Moreover, they usually follow the suit of the big banks when the market is high, resulting in the increased risks for their business.