Smaller, local, loosely regulated banks in China have shut down withdrawals. Protests are breaking out and Xi is coming down with an iron fist. It will be a real test to see if this breaks the social contract with the population where they accept authoritarian rule in exchange for safety, security, and prosperity. Protestors were attacked and beaten by security officers, apparently with Beijing approval. Seems like it would have been much easier to fund the banks unless this is just the tip of the iceberg on losses that Beijing refuses to fund. China crushes mass protest by bank depositors demanding their life savings back (msn.com) Chinese authorities on Sunday violently dispersed a peaceful protest by hundreds of depositors, who sought in vain to demand their life savings back from banks that have run into a deepening cash crisis. Since April, four rural banks in China’s central Henan province have frozen millions of dollars worth of deposits, threatening the livelihoods of hundreds of thousands of customers in an economy already battered by draconian Covid lockdowns. Anguished depositors have staged several demonstrations in the city of Zhengzhou, the provincial capital of Henan, over the past two months, but their demands have invariably fallen on deaf ears. On Sunday, more than 1,000 depositors from across China gathered outside the Zhengzhou branch of the country’s central bank, the People’s Bank of China, to launch their largest protest yet, more than half a dozen protesters told CNN. The demonstration is among the largest China has seen since the pandemic, with domestic travel limited by various Covid restrictions on movement. Last month, Zhengzhou authorities even resorted to tampering with the country’s digital Covid health-code system to restrict the movements of depositors and thwart their planned protest, sparking a nationwide outcry.
Background: Small banks in China are running into trouble. Savers could lose everything - CNN but as far as the quashing of the protests, it’s all China knows. It’s a public embarrassment to the government so it’s a threat to their rule. So they go to default mode, which is “end it by any means necessary”. They tried turning their public passports red last time they wanted to gather, and they came back again. So they went draconian.
this was not a protest against the central gubmnt, just the opposite. they were asking the central gubmnt for help. from the article Using national flags to display patriotism is a common strategy for protesters in China, where dissent is strictly suppressed. The tactic is meant to show that their grievances are only against local governments, and that they support and rely on the central government to seek redress. “Against the corruption and violence of the Henan government,” a banner written in English read.
China’s economy is a giant debt inflated house of cards. How long they can artificially prop it up remains to be seen
And the bigger problem is the US economy is heavily tied to theirs. If this spreads in China, it will have a very nasty effect on ours.
Why wouldnt it’ll be good for us? They don’t buy much from us, $164B of our $21T economy. The imports would likely get cheaper - we buy $450B from them. US investment in Chinese stocks is only $123B. By comparison 60% of the $93T US stock market is held by US citizens so that’s like $55T.
Wondering why this hasn't happened in Russia with all the sanctions on them. Like the protestors in China, once people are not able to get their money out, things will get more out of control.
Absolutely! This is from early 2020 and more centered on Covid, but outlines that scenario (even arguing that it's started and any recovery would have to be centered around China as well) A China-Centric Global Recession?
In part, because our debt is tied pretty closely with them. China is second on the list holding $1.06T (or 3.5%) in US treasuries (Japan holds the top spot at 4.3%). This is actually down YoY which is a good thing. The other piece of this is the yuan is still pegged to the dollar. Like it or not, it behooves both nations to keep their economies humming. Full disclosure: Macro-economics is not my forte. I know barely enough to be dangerous here, so I will defer more to the experts for the more intricate details.
I dont see why holding our debt is an issue, we are credit worthy. If we held their debt that would be an issue. Worst case scenario is they need money so they sell our debt fast which lowers the demand for newly issued debt. Just guessing. China is A+ we are AA+ today.
There would likely be several in line to pick up that debt if China were to call it in for sure. That could mitigate things. But if they did that, it would also likely increase the price of their exports since (if I understand it properly) it would devalue the dollar as well. U.S. Trade Deficit With China and Why It's So High
I get that. But the local government can have the same concern as the National one. And beyond that, the National folks would have likely ok’d them getting tough.
China has a few local banks that are not liquid. By itself, is not a calamity tho hard on local depositors. Had these same troubled banks made volatile 'real estate/development loans' that went sideways? Or, are these bank failures potentially systemic within the entire national banking system?
Henan: Officials pledge to release funds after China bank protest - BBC News Authorities in China's Henan province say they will start releasing money to customers who have had their funds frozen by several rural banks. The announcement came just a day after a rare protest in Henan's capital, Zhengzhou, turned violent. Payments will be made in batches from this Friday, local regulators say. The four banks that were the focus of the protests are believed to have frozen a total of 39bn yuan ($5.8bn; £4.9bn) of deposits. In a statement on Monday, the Henan Banking and Insurance Regulatory Bureau and the Henan Provincial Local Financial Supervision Bureau said "advance payments" would be made to customers through a local association supervised by China's central bank.
Those 4 rural banks basically got co-opted by a conman who used the banks as a conduit to lure money in with promises of 9-10% annual returns. He's since fled to the US, I believe, so the Chinese government will probably try to turn the anger toward the US which will almost certainly not extradite him. The amount of money involved is not that much, but there's always a question of just how widespread this type of con is in China? The regular depositors will probably be made whole, but I'm not sure about the investors who got the high return deals. Deposits are insured, investments are not.
The events of this year have strongly suggested that we need to divest ourselves of any business with China that we cannot easily walk away from in the case of war. If this nudges us in that direction, then so much the better.
There is no will to do that, either from corporate leaders sacrafacing profits or from the American public having to buy (in some cases) much more expensive merchandise. So, while that is painfully obvious to anyone with common sense, we need to figure out a way to better co-exist with China, because that is our only realistic path forward.
If we know and understand that the guy was a criminal in China, a legit criminal and not some made political criminal, why would we not kick his arse out?
