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China merges ailing small lenders to head off a big crisis

Regional governments lead efforts to shore up banking sector

The newly created Sichuan Bank is China's largest regional lender by capitalization following last year's merger of two commercial banks. (Photo by Iori Kawate)

BEIJING -- The northern landlocked Chinese province of Shanxi marked the birth of a new bank formed through the merger of five regional lenders last month with the ceremonial unveiling of a new bank sign. 

Shanxi Bank is capitalized at 24 billion yuan ($3.7 billion), making the institution the second-largest municipal commercial bank in China. The largest lender in that category, Sichuan Bank, was formed last November through the merger of two commercial banks in Sichuan Province.

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