For years, China’s largest state-owned banks have been a local investor favourite. With dividend yields that once topped 8 per cent and stock prices that delivered steady gains, they became a staple in the portfolios of retirees looking for stability and income. Even during the 2008 global financial crisis, these lenders remained resilient, backed by state support and conservative regulation. But the investment case is no longer so straightforward.

China’s largest lenders remain majority state-owned and systemically critical. They are designed to deliver not just profits but national policy. This alignment with state objectives has historically been one of their greatest strengths, providing investors with confidence that the government would step in to ensure their stability during times of stress.

But the flipside is growing harder to ignore. That same alignment now exposes these banks to shifting political and economic policies. As China intensifies efforts to counter a prolonged property slump and weak consumer confidence, lenders are being called on to play a larger policy role. Continued mortgage rate cuts and targeted lending to small and medium-sized enterprises at below market rates are expected to persist for lenders, squeezing margins.