Chinese authorities are moving quickly to thwart more public discontent after hundreds of bank depositors held a rare protest last week outside government offices in Zhengzhou, capital of Henan province.

The central bank regulator, the China Banking and Insurance Regulatory Commission (CBIRC), said that it would “handle the risks associated with five rural banks,” four in Henan and one in Anhui.

There were no protests in Anhui, but a peaceful rally outside government offices in Henan on July 10 met with a violent crackdown by unidentified individuals that sparked outrage in China.

At stake are deposits worth 40 billion yuan ($6 billion), according to the South China Morning Post.

Many depositors have wanted to withdraw their savings from the banks since April but couldn’t, a problem the institutions initially blamed on upgrades to computer systems. The banks have not issued any communication on the matter since April, depositors said, and by May, protests had erupted.

Authorities froze the accounts pending an investigation into how the banks came to be without the cash needed to meet withdrawal requests.

The scandal at the rural banks has drawn national attention as Beijing is struggling to maintain economic growth in the face of President Xi Jinping’s commitment to a zero-COVID policy that has prompted widespread lockdowns and a resulting economic slowdown.

Chinese banking regulators have blamed the Henan New Fortune Group for manipulating online transaction systems at the rural banks for its own gain, according to a WeChat post by the China Banking and Insurance News, reported the Global Times, a state-affiliated news outlet.

The banking commission also posted Sunday on the Weibo account of the China Banking and Insurance News, a newspaper funded by CBIRC. It stated that the banking regulator has pledged to repay depositors in accordance with laws and regulations, but whether they will recover their full lost savings remains unclear. Weibo is China’s Twitter-like social media platform.

On Thursday, the Henan and Anhui provincial bureaus of banking and insurance regulatory commissions announced that they would begin to make whole people who had less than 100,000 yuan, or $14,774, on deposit starting July 25. This will be the second batch of payments.

Last Friday, the same local authorities initiated measures to release payments through a WeChat app called “Village Bank Advance Payment.” But some people contacted by VOA Mandarin said they had yet to see their money.

A depositor from Zhengzhou, a retired military man who asked not to be named for fear of reprisal, told VOA Mandarin on Saturday that the depositors in his village who were eligible for the first batch of payments “did not get the money” because the system kept showing that it was still in the process of “verifying information.”

According to the depositor, most depositors remain dissatisfied, especially those like him who had more than RMB 50,000, or about $7,400, on deposit.

He told VOA Mandarin that the authorities introduced the payment plan to “curb the widespread public dissatisfaction” over the financial fraud and to divide the depositors who participated in the Zhengzhou protest on July 10.

At that event, protesters carried banners demanding “Henan banks, pay back our legal deposits.” One in English said, “Against the corruption and violence of the Henan government.” In some videos, protesters were violently kicked and dragged by individuals in white shirts and black trousers who were not identified.

VOA Mandarin contacted the Henan provincial Public Security Bureau, the Zhengzhou business district police station and the Zhengdong branch of the city’s Public Security Bureau regarding the identity of the individuals who struck out at protesters. None of the three responded.

Analysts told VOA Mandarin that repayments might depend on how the deposited funds were used.

Meng-Chun Liu, director of the First Research Institute of the Chinese Economic Research Institute in Taipei, said he believed that brokers in the banks might have sold “financial products” to most depositors. If so, the depositors who invested their savings into “investments” of financial products may be out of luck.

Xie Tian, a professor at the Aiken School of Business at the University of South Carolina, told VOA Mandarin, “I think that the Henan Rural Bank is not a fortuitous incident, it is a nationwide problem. [Similar problems in other banks] in other provinces have not yet begun to break out, and the Chinese Communist Party’s supplement [reserves] may not be fully sufficient. If they can’t solve this, more problems will rise.”

— Voice of America (VOA)

www.voanews.com/a/china-pushes-to-quell-protests-over-billion-dollar-banking-scandal-/6669271.html