Crowds of customers of the People’s Bank of China branch in the city of Zhengzhou, 600 km southwest of Beijing, clashed with police on Sunday in protest at the freezing of their accounts at several rural banks. A video of the events spread on some social networks, without an official communication about what happened.
In the province of Henan thousands of savers opened an account in one of the six rural entities in this area in recent months, which offered remuneration with high interest rates. But last spring they found they couldn’t get their money out, after the parent company’s chief executive was on the run and wanted for financial crimes. “We came and wanted to recover our savings, because I have elderly people and children at home, and the impossibility of withdrawing the savings has seriously affected my life,” declared one of those affected, among the thousands who came to demonstrate.
This social unrest seems to have had some effect, because the authorities of the Chinese province of Henan declared on Monday that they will first begin to return, on behalf of several rural banks, the funds of some clients that had been frozen. Payments will be made in batches, the first of which will be made on July 15. They will first charge clients with deposits of up to 7,400 euros, with negotiations for the rest later, according to the banking regulator.
According to local media, customers have not been able to withdraw money since last April. Covid and travel restrictions have so far delayed protest movements. Up to 400,000 customers with a total of 40 billion yuan (5.96 billion euros) deposited in these banks could be affected by the blockade. Deposits in China are guaranteed up to 500,000 Chinese yuan, about 74,500 euros, but many clients of Henan banks deposited much more.
On the investigation front, there could soon be news about the details of the plot of illegalities and fraud because the police of Xuchang, a city in Henan, announced on Sunday the arrest of a criminal group that operated in local finances. This organization controlled several rural banks since 2011 and made “illegal” transfers through fictitious loans.
“In the last two decades, China has seen a housing bubble of historic proportions, coupled with one of the fastest rises in debt ever seen. This means that what is happening in Henan is simply part of a process that has many years to go before it is resolved,” said Michael Pettis, a finance professor at Peking University.
Several economists have long warned about the fragility of the Chinese financial system. The Government is intervening at the moment to curb bankruptcies, but this delays a reorganization that experts consider necessary.
