China Henan Province Deposit Freeze Crisis... "Economic Risks Will Gradually Emerge"

Source= China Weibo

[Asia Economy Reporter Kim Hyunjung] The Hong Kong South China Morning Post (SCMP) reported on the 30th that protests broke out at rural banks in central China's Henan Province due to a deposit freeze. According to SCMP, deposits at four banks?Weizhou Xinminsheng Bank, Shangkai Wuyimin Bank, Zicheng Huanghuai Bank, and Kaifeng Xindongfang Bank?have been frozen since the 18th and cannot be withdrawn.

Last week, protests demanding "Return our money" continued in front of the Henan branch of the China Banking and Insurance Regulatory Commission (CBIRC) in Zhengzhou, accompanied by banners. Related photos and videos have been rapidly spreading on the internet recently.

Chinese regulators have not confirmed the amount frozen, but according to depositors who have formed groups on social media platforms, the frozen amount reportedly reaches hundreds of billions of yuan, SCMP reported.

A protester from northeastern Liaoning Province said, "Since the 18th, I have not been able to sleep or eat," adding that he and his parents hold a total of 860,000 yuan (about 160 million KRW) in deposits at three banks where funds have been frozen.

However, SCMP assessed that the deposit freeze at China's small rural banks could be a warning sign amid rising risks of an economic downturn in the world's second-largest economy. It emphasized that "rural banks, which play a key role in financing farmers and small businesses in underdeveloped areas, are more vulnerable during economic recessions."

In China, a depositor protection system applies to local and foreign currency deposits held by domestic banks for all companies and individuals, covering up to 50 million KRW per depositor. However, controversy has intensified after a video circulated showing Yang Hwajun, head of the CBIRC Henan branch, telling protesters that "legal deposits will be protected."

For years, China's small rural banks have offered higher interest rates than commercial banks through internet platforms to attract funds from outside their regions. The four banks reportedly offered general deposit products with interest rates of about 4.1% to 4.5% for a five-year term. In comparison, the five-year deposit interest rate at Chinese banks is only 2.75%. Last year, regulators announced that local lending institutions should not attract deposits nationwide through internet platforms outside their regions. SCMP also reported that some depositors were notified by banks that their funds were not "bank deposits."

An anonymous CBIRC official told the Chinese economic magazine Caixin that "accumulated risks in some regions are relatively large," stressing the need for stronger controls. The official added, "Risks caused by the impact of COVID-19, economic changes, and industrial shifts will gradually become apparent."

This content was produced with the assistance of AI translation services.