Bank runs are bad. They're bad enough to bring down governments. There's been a slow-motion bank run in rural China for several months, and people are starting to get concerned that the "contagion" could spread.
In the anatomy of an economic crisis, a bank run is the point of no return.Bank runs occur when people scramble to withdraw cash from banks in fear of collapse. In the worst cases, banks' liquid cash reserves are exhausted, not everyone gets their money and the bank defaults. ...
In recent years it has become clear the Chinese people are losing faith in their financial institutions. There's been anger over harsh COVID lockdowns in Shanghai recently, while the collapse of China Evergrande saw rare public demonstrations as residents faced the prospect of losing their life savings used as deposits for housing. ...
Multiple sources contacted by Asia Markets, have confirmed deposits at the following six banks have been frozen since mid-April.
- Yuzhou Xinminsheng Village Bank (located in Xuchang City, Henan Province)
- Zhecheng Huanghuai Bank (City of Shangqui, Henan Province)
- Shangcai Huimin Rural Bank (Zhumadian City, Henan Province)
- New Oriental Village Bank (City of Kaifeng, Henan Province)
- Huaihe River Village Bank (Bengbu City, Anhui Province)
- Yixian County Village Bank (Huangshan City, Anhui Province)
It's understood the banks with branches across the Henan and Anhui Provinces successively issued announcements in April, stating they would suspend online banking and mobile banking services due to a system upgrade.
At the same time, clients reported their electronic deposits in online accounts, mobile apps and third-party platforms could not be withdrawn.
This led to depositors rushing to local bank branches, only to be told they were unable to withdraw funds.
It looks like the bank failures are due to fraud and corruption -- bank managers simply stole the money. Hopefully this corruption isn't widespread and the problem can be contained.
