Recently, China's domestic banks have disclosed last year's performance. While a number of bank executives claim that bad loans have beem stabilized or have a negative rate, this view is somewhat optimistic. For Anbound research team, the level of bad debts in China’s banking industry is highly dependent on macroeconomic growth and reform effectiveness. In the case of long-term downward pressure on China's economy, there has been no substantial progress in the reform. With the large number of bad debts in the banking industry, it is difficult to feel optimistic about the challenges to the prospects of the future. Even for the bigger state-owned banks, profitability and efficiency are still harder to achieve. In the future, banks in China will still be facing long-term challenges like net interest income decline, cost control, diversification of income, business inefficiency and other factors.