The saving accounts of 400,000 Chinese depositors in rural banks in Henan Province were cleared overnight, and the incident sparking protests and a violent response.
On July 10, about 3,000 depositors protested outside the Zhengzhou branch of the People’s Bank of China, or central bank. A bloody clash broke out between the protesters and the police. Some depositors were severely beaten and had serious facial injuries.
A Twitter account named Wanjun Xie shared a video, showing many people in the protest were forcibly taken into a bus and escorted away by the police.
In another video, Wanjun Xie described the demonstrators as being suppressed by a large number of police, and many of them were arrested.
This user revealed that thousands of police officers were deployed to storm the protesters, and the conflict was like an ancient battlefield.
Twitter user Wenxingwu uploaded a video. He wrote that Henan bank depositors were beaten and arrested by underworld thugs hired by the government.
Twitter user Hoahoah reposted a picture from local savers, which shows a man beaten with blood in his eyes.
Sources said that a depositor hanged himself in the street in desperation. In a photo of the protest, a young boy holds a sign demanding the banks pay back their money because “I want to go to school”.
On the evening of July 10, Henan officials made a quick response after the incident.
SCMP reported that the Xuchang City Public Security Bureau in Henan explained that the investigation was progressing in an orderly manner. They said they have identified a suspect.
Xuchang police said in a statement: “It is now further confirmed that, since 2011, a criminal gang led by the criminal suspect Lu Yi has used the Henan Xincaifu Group to effectively control several rural banks, by ways of cross-shareholding, increasing capital and shares, and manipulating bank executives, among other means.”
Police said that the gang used third-party online financial platforms, its own platform, and a number of capital brokers to attract deposits and promote financial products.
The gang illegally transferred funds by means of fictitious loans, and set up a company to delete and meddle with data.
But SOH cited an analyst who said that there was a trap hidden in the police report.
The analyst said that the police’s use of the phrase “promotion of financial products” may mean that the money lost by depositors will not be characterized as “deposits” in the end, but become “financial products”.
The difference is that deposits can be protected by deposit insurance, but financial products do not have such insurance. This type of wording manipulation is typical of the communist authorities.
Under the Regulations on Deposit Insurance, depositors with a deposit of less than 500,000 yuan ($74.330) can receive full compensation. And those with a deposit of more than 500,000 yuan can only recover 500,000 yuan.
Meanwhile, there is no compensation for wealth management products in case of loss.
On July 10, Henan’s Banking and Insurance Regulatory Bureau and the local financial supervision agency also issued a joint announcement. They stated vaguely that “the relevant departments are accelerating the verification of customer fund information of the four rural banks and formulating a disposal plan, which will be announced in the near future.”
China’s cash crisis has involved not only rural banks. The four major state-owned banks have recently also encountered problems of restricting depositors’ withdrawal limits and suddenly freezing bank cards.
On July 6, a depositor in Zhejiang Province revealed that the Agricultural Bank of China illegally transferred all of his savings. The depositor called the police, and the bank’s customer service said it was using the money for a short-term financial project.
Some analysts said that the incident is raising a wake-up call for the Chinese depositors. They believe that this chaos signals a precursor to China’s financial collapse.