> 40% or so is rural banks etc

Aren’t those the banks that were taken over by gangs and has their funds embezzled? You’re painting way too rosy a picture of the Chinese financial system. It’s taken months to make rural depositors while after having their money stolen. They’re still waiting.

~300/4400 banks represening ~1% (I think 500B USD worth) of total PRC banking assets fell within the high risk category according to PBOC audit last year. Which included the rural banks running the high interest scam by gangs hence the April crack down. For reference the 24 major banks hold 70% of assets. Interestingly these stats were released in PBOC Q1 press briefing in mid April that seems to coincide with hammer falling on these banks. It's a hit on small rural bank reputation, but it's not catastrophic. Shouldn't be surprise it will take months to untangle mess and determine whether / who should be compensated by national bank insurance scheme for non-compliant transactions from obvious scam (10% interest). So far they've settled to compensate clients with 50k rmb or less on Monday to spare small time dummies who got scammed. Questionable if larger depositers will, or should be compensated.

Do the big state-owned banks not have any exposure to high-risk banks or real estate developers?

Nothing significant no. Ping An had some exposure but it's already written down - they are also not a bank, they are an insurrance firm but worth mentioning as they were the highest profile entity with exposure. That doesn't mean zero of course, they are still taking a haircut on whatever assets they do hold but at a % of assets it's not significant, also they are likely to get preferential treatment when it comes to servicing debt as domestic bond holders.

Because of their horrendous credit ratings developers actually had a huge amount of trouble sourcing capital locally and were forced to sell junk bonds on the international market at elevated yields. This means a few things, firstly that everyone acknowledged the risks (hence the high yield) but also that the impact of the RE market slowdown is devastating on these over-leveraged developers because of their very high cost of debt.

The fact that the assets were always junk rated is partially why this is way less of a big problem than people are trying to make it out to be. In 2008 the problem was the assets were AAA rated (the exact opposite of junk) and thus were held in enormous quantities by large banks and funds all around the world. Conversely because of the risk these assets posed they are held rather narrowly in comparison and those that do hold them knew and were sophisticated enough to accept the risks.