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"Give us our money back"
: Hundreds of investors demonstrated in front of a branch of the Chinese central bank on Sunday.
At four Chinese banks, customers have not been able to access their deposits for months.
The demonstration is initially peaceful...
Photo: SOCIAL MEDIA / via REUTERS
They hold up banners and loudly demand their money back.
Bottles and other objects fly through the air.
Videos show how plainclothes security forces, dressed in summer clothes, drag people out of the crowd and finally use violence to break up the demonstration of hundreds of people in front of a branch of the Chinese central bank near the 10-million city of Zhengzhou.
Images like these are not spreading on social networks for the first time – most recently on Monday night.
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... until plainclothes security forces start dragging demonstrators off the stairs ...
Photo: SOCIAL MEDIA / VIA REUTERS
Hundreds of desperate Chinese have demonstrated several times this year in front of branches of the Bank of China because they can no longer access their accounts at smaller banks.
Four institutions operating in central China's Henan Province have frozen hundreds of millions of dollars in deposits from at least 420,000 customers in that region alone since mid-April, according to various reports.
Initially, customers were informed that internal systems would be updated and then access to deposits would be granted again.
This is apparently not the case, according to correspondents from Bloomberg, the Financial Times and Caixin, one of the few remaining independent Chinese media outlets.
According to Caixin, the institutions controlled by Henan Xuchang Rural Commercial Bank froze the equivalent of more than $1.5 billion not just in Henan province but nationwide.
Other reports speak of at least $6 billion in frozen deposits.
The Chinese supervisory authority for banking and insurance has been investigating the case for months - and is delaying customers.
Information flows only sparsely.
According to the reports, the police have accused a criminal gang of falsifying loans and withdrawing billions of dollars.
However, observers have been concerned for some time that the four banks are not an isolated case, but that the problems in the real estate sector in China are now increasingly affecting smaller institutions.
"Regional banks are much more exposed to real estate than they care to admit," warns a Hong Kong-based hedge fund manager who trades construction company debt.
As authorities tightened their crackdown on heavily indebted construction companies, many local banks' cash flows have come under pressure.
And although nominally small, China's local banks are of great importance as they lend to small and medium-sized firms.
These, but also many private individuals of the incriminated banks have not had access to their money for months.
"As expected, the problems in the Chinese real estate sector have spread to the national banking system," credit analyst Marco Metzler told manager magazin.
"There were first protests in October last year after the Evergrande bankruptcy," recalls Metzler, who, as a creditor and foreign investor, filed criminal charges against the Chinese real estate colossus in February of this year for bankruptcy fraud.
The real estate group, which Beijing has been pulling the strings for a long time, has piled up more than $300 billion in debt and has repeatedly defaulted on interest payments on both domestic and foreign bonds.
Domestic bondholders of the struggling real estate giant on Monday refused a deferral of payments on a $700 million debt instrument.
The group had announced a restructuring plan several times, but so far none has been made available.
Local Evergrande investors reject deferred payment
Evergrande has at least $20 billion at stake for foreign creditors.
They will probably never see this money again, says Metzler.
His attempt to initiate insolvency proceedings against the group has so far been unsuccessful.
"We're not just up against Evergrande, we're also up against the Chinese government," the investor and former senior analyst at Fitch Ratings recently explained.
For the time being, he himself will not make any further efforts to save his investment.
The overheated real estate sector accounts for about a quarter of China's economic output.
"Any major bankruptcy here can pull other Chinese real estate companies, banks and insurers down with it," warns Metzler.
The state has so far been able to prevent the collapse of the national banking system in China because it rushed to help struggling institutions.
International creditors of Chinese real estate groups have so far received nothing because the funds were needed to stabilize the national financial market.
"Now it doesn't even seem to be enough for that, otherwise the situation would probably have been resolved by now," speculates Metzler.
While large foreign investors continue to try to come to an agreement with Evergrande behind the scenes, the patience of domestic bank customers and creditors seems to be exhausted - they are taking to the streets again and thus also taking the risk of state repression.
She is driven by sheer necessity: "The fact that we cannot withdraw money has enormous effects on the operation of our factory, including procurement and the wages of the workers," the Reuters news agency quoted a Chinese manufacturer as saying.
Like him, hundreds of thousands of other desperate bank customers are demanding above all an answer and a timetable for the rehabilitation of the closed banks.
Bank customers monitored via health app and restricted their mobility
But instead of telling customers the truth, the authorities are apparently trying to restrict the mobility of affected bank customers in a targeted manner - also to prevent them from protest demonstrations.
To do this, the authorities used the digital health monitoring system that is widespread throughout China.
Background: China is undeterred by its zero-Covid strategy.
Without a mobile health app that stores an accurate movement profile for contact tracing, no citizen can travel freely or move around a city.
Many municipalities operate their own system, but many of them are networked with each other.
According to Caxin, many affected bank customers have had the surprising experience in the past that their health code on the app suddenly switched from green to red – even though the mandatory Covid tests for entering Henan province had previously been negative.
Other bank customers reported having to go to central quarantine at their own expense after arriving in Zhengzhou by train and having their codes previously bounced to red.
Other people affected, who, according to their health app, were also suddenly considered a health risk, were stopped on the open road upon entry, registered and had to appear at the local authorities.
According to "Caixin", employees of health authorities in Zhengzhou and other cities still denied in June that they themselves or on behalf of third parties had interfered with bank customers' health apps or fed them with false data.
According to Bloomberg, authorities in Zhengzhou have now fined five officials for changing the health labels of more than 1,300 bank customers who cannot get their money to red - and thus tried to prevent these people from entering public places or using public transport use, reports "Bloomberg".
According to Metzler, the authorities know exactly what and why they are doing it.
In any case, the effect of the increasing protests by cheated bank customers should not be underestimated.
"If other banks in other provinces are threatened with insolvency, then China's internal stability is at risk."
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