Subject. This article examines China's banking sector, its operation, regulation, and challenges.

Objectives. The article aims to analyze the current state, pressing issues, and challenges of China's banking sector in relation to the overall trends of the national financial market and the peculiarities of the country's socioeconomic development.

Methods. For the study, I used the general scientific methods, formal logic, analysis and synthesis, analogy and data systematization, as well as the method of expert assessments.

Results. The article finds that, faced with a large-scale liquidity crisis in the provincial and rural banking segment, the People's Bank of China initiated a sector consolidation campaign, resulting in a significant reduction in the number of local industry players. The article identifies a number of factors that determine the complex stage of development of China's banking sector.