China pushes to quell protests over billion-dollar banking scandal

Chinese authorities are moving quickly to further thwart public discontent after hundreds of bank depositors staged a rare protest last week outside government offices in Zhengzhou, capital of Henan province.

The central bank regulator, the China Banking and Insurance Regulatory Commission (CBIRC), said it would “manage risks associated with five rural banks”, four in Henan and one in Anhui.

There were no protests in Anhui, but a peaceful rally outside government offices in Henan on July 10 was met with a violent crackdown by unidentified individuals that sparked outrage in China .

At stake are deposits worth 40 billion yuan ($6 billion), according to the South China Morning Post.

Many depositors have wanted to withdraw their savings from banks since April but have been unable, a problem institutions initially blamed on upgrades to IT systems. The banks have not issued any communication about it since April, depositors said, and by May protests had erupted.

Authorities froze the accounts pending an investigation into how the banks ended up without the money to meet withdrawal requests.

The rural banking scandal has drawn national attention as Beijing struggles to maintain economic growth in the face of President Xi Jinping’s commitment to a zero COVID policy that has caused widespread lockdowns and an economic slowdown that results.

Chinese banking regulators have accused the Henan New Fortune Group of manipulating rural banks’ online transaction systems for its own benefit, according to a WeChat post from the Banking and insurance news in Chinareport it world timesa state-affiliated media outlet.

The Banking Commission also posted on the Weibo account of the Banking and insurance news in China, a journal funded by the CBIRC. He said the banking regulator has pledged to reimburse depositors in accordance with laws and regulations, but whether they will recover all of their lost savings remains unclear. Weibo is China’s Twitter-like social media platform.

On Thursday, the Henan and Anhui provincial offices of the Banking and Insurance Regulatory Commissions said they would start making payouts to people who had less than 100,000 yuan, or $14,774, on deposit from of July 25. This will be the second batch of payments.

Last Friday, the same local authorities took steps to unblock payments through a WeChat app called “Village Bank Advance Payment”. But some people contacted by VOA Mandarin said they had yet to see their money.

FILE – People hold banners and chant slogans during a protest at the entrance of a branch of China’s central bank in Zhengzhou, central China’s Henan province, July 10, 2022. (AP via Yang)

A depositor from Zhengzhou, a retired military man who asked not to be named for fear of reprisals, told VOA Mandarin on Saturday that depositors in his village who were eligible for the first batch of payments “did not receive money” because the system kept showing that it was still “verifying information”.

According to the depositor, most depositors remain dissatisfied, especially those like him who had more than 50,000 RMB, or about $7,400, on deposit.

He told VOA Mandarin that authorities introduced the payment plan to “curb widespread public discontent” over financial fraud and to divide depositors who participated in the Zhengzhou protest on July 10.

At the event, protesters held up banners demanding “Henan Banks, Repay Our Legal Deposits.” One in English read, “Against Henan government’s corruption and violence.” In some videos, protesters were violently kicked and dragged by unidentified individuals in white shirts and black pants.

VOA Mandarin contacted the Henan Provincial Public Security Bureau, Zhengzhou Business District Police Station and Zhengdong Branch of the city’s Public Security Bureau regarding the identities of those who beat the protesters. None of the three responded.

Analysts told VOA Mandarin that refunds could depend on how the deposited funds were used.

Meng-Chun Liu, director of the first research institute at the China Institute of Economic Research in Taipei, said he believed banks’ brokers could have sold “financial products” to most depositors. If this is the case, depositors who have invested their savings in “investments” of financial products may be out of luck.

Xie Tian, ​​a professor at the University of South Carolina’s Aiken School of Business, told VOA Mandarin, “I think the Henan Rural Bank is not a chance incident, it’s a national problem. [Similar problems in other banks] in other provinces have not yet begun to break out, and the Chinese Communist Party supplement [reserves] may not be entirely sufficient. If they can’t solve this problem, other problems will arise.”