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Two China Provinces to Repay Depositors After Rare Protests

China’s banking regulator moves to pacify angry depositors, says banks in Henan and Anhui provinces will start repaying customers on behalf of rural lenders whose accounts were frozen


Chinese banks scandal
Demonstrators hold banners during a protest over the freezing of deposits by rural-based banks, outside a People's Bank of China building in Zhengzhou, Henan province, on July 10. File video screengrab: Reuters.

 

China’s banking regulator said two Chinese provinces will start repaying customers on behalf of multiple rural lenders some of their funds that were frozen as it moved to pacify angry depositors who have rallied in a rare show of dissent.

The China Banking and Insurance Regulatory Commission said in notices posted by its local branches on Tuesday and Monday that payments will be made in batches by Anhui and Henan provinces, with the first due on July 15.

On Sunday, about 1,000 people gathered outside the provincial branch of the Chinese central bank in Henan’s capital of Zhengzhou to demand action on their frozen deposits, leading to the most violent clashes since protests began around two months ago.

In April, a number of banks in Henan froze deposits raised from ordinary Chinese people, with Chinese media reporting that the deposits could be worth up to $1.5 billion. Other outlets have put the figure even higher.

An investigation for possible fraud is underway.

 

Suspects Arrested, Funds Frozen

Police say they have arrested some suspects and frozen funds in connection with the disappearance of the deposits, according to an official notice posted late on Sunday.

The regulator’s Henan branch said payments will be made to some customers with savings of under 50,000 yuan ($7,429.86) of Yuzhou Xinminsheng Rural Bank, Shangcai Huimin County Bank, Zhecheng Huanghuai Community Bank and Kaifeng New Oriental Rural Bank.

The same will be arranged for depositors at Guzhen New River Huai Village & Township Bank, a lender connected to the Henan banks, its Anhui branch said.

Henan police said the suspects were able to effectively control a number of the province’s banks via a group company, according to the notice posted on an official WeChat account.

The criminal cohort used third-party financial product platforms and a firm they set up themselves to gather deposits and sell other financial products. They then made fictitious loans as a way to illegally transfer the funds, the notice said.

 

  • Reuters with additional editing by Sean O’Meara

 

 

 

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.

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