China’s small banks are having difficulties. Savings could be completely lost.

China’s small banks are having difficulties. Savings could be completely lost.

According to a calculation made in April by the state-owned magazine Sanlian Lifeweek, as many as 400,000 banks customers throughout China were unable to access their savings.

This is a drop in the vast ocean of China’s banking system, but about 4,000 small lenders hold about 25% of the industry’s total assets. These lenders frequently have ambiguous ownership and governance structures and are therefore more susceptible to corruption and the country’s recent economic slowdown, according to experts.
According to Frank Xie, a professor at the University of South Carolina Aiken who specializes in Chinese business and the economy, “the magnitude of the bank scandals where bank personnel embezzle and steal monies from depositors is disturbing, and what is uncovered could only be the tip of the iceberg.”

“Bank runs could become more frequent and more significant as the Chinese economy slows down further, the fiscal shortage worsens, and debt repayments among Chinese enterprises, particularly in the real estate sector,” he said.

Many savers are at their limit. Hundreds of depositors flocked to Zhengzhou, the capital of Henan, late last month in an unsuccessful attempt to protest outside the headquarters of the banking regulator and demand their money returned.

In June, there was another demonstration planned. According to six persons who spoke with CNN and posts on social media, the depositors were shocked to see that their health codes, which were green when they left, had changed to red when they arrived in Zhengzhou. Anyone having a red code, which is ordinarily given to those with Covid infection or those authorities judge to be at high risk of infection, is immediately persona non grata.
They are prohibited from using any public transportation or spaces, and the government frequently quarantines them for weeks.

The Zhengzhou administration has been contacted by CNN for comment. The Henan Provincial Health Commission stated that it was “investigating and confirming” the concerns from depositors who received red codes to, a state-run news website.

What is the cause of the issue in Henan?

The private investment company that owns significant holdings in each of the four lenders in Henan has been blamed by the China Banking and Insurance Regulatory Commission.

According to the Henan police, numerous individuals have been detained after allegations that a criminal organization led by the controller of the investment firm “has been accused of utilizing rural banks to perpetrate significant crimes.”

There is no longer a website for the Henan New Fortune Group. CNN unsuccessfully attempted to contact the business for comment over the phone and via email. The company has not released any statements to the public, and it is thought to have been dissolved.

The four Henan banks announced later on Monday that they will begin gathering data from clients who have been impacted by the closure of their online transaction systems. The banks noted in separate comments on their website that the action was necessary by financial regulators without going into greater detail.

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