Cover Story: China’s Bank Deposit Insurance Plan Is Seen Needing New Support

Consensus forms to give teeth to regulator and triggers to act more swiftly

In the spring of 2019, a quiet but historic event shook China’s banking sector: Baoshang Bank collapsed. It was the first true bank failure in the country since the founding of the People’s Republic, and the first real test of a deposit insurance system created four years earlier. That test would define the future of financial risk management in China.

Today, the bank born from Baoshang’s ashes—Mengshang Bank—is not only alive but profitable. It reported 2024 net income of 180 million yuan ($25 million), up 65.2% from the previous year, excluding losses booked from merging with a dozen rural banks. Its bad loan ratio dropped to 1.02%, while provision coverage surged to nearly 300%. For regulators, these numbers are more than good news—they’re vindication. Baoshang’s messy but controlled exit was the proving ground for China’s deposit insurance experiment.

That system, established in May 2015, functions much like its Western counterparts: banks pay regular premiums into a centralized fund, which protects depositors (up to 500,000 yuan per account) if a bank fails. As of the end of 2024, 3,761 institutions had joined, with premiums totaling 373.2 billion yuan—enough to fully insure over 99% of individual depositors, a coverage rate among the world’s highest.

But those