The suffering of the Chinese people is often hidden from the world, but the bank runs they are seeing cannot remain a secret for much longer.
June 20, 2022
By: Bobby Casey, Managing Director GWP
We saw stories about it. People were fleeing Ukraine, and people were withdrawing their funds. The coverage was everywhere for a while and sympathy soared.
People are less concerned with China. The media is less concerned with China. Nothing China does seems to warrant the critical attention of the press. Until June 6th, China locked down Shanghai for roughly 2 months:
[R]esidents of the China’s capital flocked to bars and restaurants to celebrate. There were two reasons to raise a glass. The first was the return of normal life after a patchwork of anti-coronavirus lock downs kept businesses closed and confined many people to their homes for months. The second was their narrow escape.
Beijingers had dodged the kind of massive lock down that Chinese authorities imposed on Shanghai, paralyzing the global business hub for two months and leaving some 25 million people trapped at home.
People were so relieved to be free from the lock downs, they celebrated at a local bar where another outbreak occurred sending them back into lock down.
Six days after party night, the outbreak that started in the club had grown to 287 cases, which is alarming by Chinese standards. It’s prompted a fast U-turn by Beijing authorities: They not only shut down dozens of bars and hundreds of restaurants in the vicinity, but all entertainment venues including karaoke bars and mahjong houses.
Local government health workers traced and ordered into isolation all those who were out partying near the initial Chaoyang outbreak, as well as thousands of their close contacts — and even thousands of the contacts’ contacts. Some of them have ended up under strict quarantine, with their entire buildings and everyone in them sealed off.
While some Westerners think China’s policies and behaviors of late exemplify a strong and tenable solution to the virus and its spread, those actually trapped in Shanghai have a slightly different opinion; as evidenced by the massive celebrations when the restrictions were lifted.
If you take strict enforcement of lock downs, tracking through apps, and then a social credit score… the freedom to move freely has been greatly restricted. The apps used to track people can also be used to control their movements:
Two widely used mobile phone apps, AliPay and WeChat—which in recent years have replaced cash in China—helped enforce the restrictions, because they allow the government to keep track of people’s movements and even stop people with confirmed infections from traveling.
The nearly cashless society China has created not only tracks people, but can cut people off from their funds.
These lock down tactics aren’t the only events contributing to the uneasiness of Chinese citizens. In Q4 of 2021, China Evergrande Group, came under audit for its going concern reporting. That is to say, their ability to pay their debts. They got into massive subprime lending, and now are facing an audit after a complaint was lodged by a member of the public on Evergrande’s 2020 accounts.
It is the second-largest property developer in China and ranks amongst the top 150 companies in the world based on revenue. According to Fortune 500, the company has over 123,000 employees, and posted total revenues of $73.5 billion in 2020.
This precipitated protest. But it keeps unraveling. Six banks have so far been confirmed to be freezing accounts:
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)
The claim in April was “system upgrades”, but account holders have not been able to access their funds for two months.
The largest shareholder of the banks listed is Henan New Fortune Group. Guess who is currently under investigation for fraud? Anti-CCP group, bannedbook.org, reported the following:
“According to a call recording between depositors and police officers, a company named Henan New Fortune Group Investment Holdings Co., Ltd. is suspected of illegally absorbing public deposits, and the amount is huge.”
The Chinese media isn’t covering what is happening. But as distrust and concern start to spread beyond the small provinces and into the cities, protests and lines are emerging. For now, citizens are posting about them in blogs and tweets.
While it’s uncertain if the people of China should be legitimately concerned or if this is just central planning gone awry. But I think we all know that panic has a way of gripping people in a way that is impossible to reign back in.
China has very tight controls on the information it allows in or out of the country, which can be said about nearly everything that goes in and out of that country. It’s an extreme example, but a run on the banks is precisely why having offshore bank accounts make sense.
Losing some of your funds is better than some who right now face losing all of them.