Chinese depositors left confused as 3 banks freeze $178 million of deposits since April 18

On April 18, three banks in China’s central Henan province froze at least $178 million in deposits, leaving businesses unable to pay employees and individuals unable to save.

This means customers can not access their money in the banks, with all three banks informing customers that they are upgrading internal systems. Depositors told Reuters that the banks have not released any more messages on the situation.

Depositors from the southern Zhejiang province spoke via WeChat and prepared a spreadsheet in which they self-reported 1.2 billion yuan ($177.55 million) in frozen funds across three banks.

Yu Zhou Xin Min Sheng Village Bank, Shangcai Huimin Country Bank and Zhecheng Huanghuai Community Bank were among the banks affected by this incident.

What they are saying

Jerry Chang, the owner of a firm in Hubei province, told Reuters that he is unable to access funds deposited at Yu Zhou Xin Min Sheng Village Bank.

“Not being able to withdraw money has a huge impact on the operation of our factory, including procurement and workers’ wages,” said Chang, who used the bank because of its marginally higher interest rate of 1.85%.

Tony Qian, an investment consultant from Zhejiang province, is unable to access the 20 million yuan he saved in Yu Zhou Xin Min Sheng Village Bank to purchase a property.

“The thing I’m most angry about is … no one has explained anything to us,” said Qian.

What you should know

  • China’s numerous local banks have increasingly large significance since they lend to small and medium-sized businesses.
  • However, banks’ profitability and asset quality are widely expected to suffer as a result of reduced business activity caused by stringent COVID-19 control measures, raising the possibility of a second-quarter economic contraction.
  • The China Banking and Insurance Regulatory Commission, which was cited in media reports on May 1 as saying it was looking into the matter, and the People’s Bank of China, the central bank, did not respond to faxed requests for comment
  • There have been reports of protests outside bank branches, while others said they had travelled to the banks’ headquarters in search of an explanation only to be turned away by police.

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