Opinion | Cats, rats and what a fistful of dodgy dollars in the desert tells us about China’s banking system
If you believe the numbers, China’s banking system is just fine. But a small bank branch in the country’s financial wild west tells a different story
The Wenchang Road outlet of the Postal Savings Bank of China in the desert city of Wuwei is in the literal and metaphorical wild west of the Chinese financial world.
Wuwei is in the remote western Chinese province of Gansu and is at the centre of the country’s latest multibillion-yuan banking scandal – based on a fraud that went undetected for years.
According to China’s banking watchdog, the China Banking Regulatory Commission (CBRC), a manager at the branch forged 7.9 billion yuan (US$1.2 billion) in commercial papers and misused 3 billion yuan of client funds to pay the forged bills.
Wuwei is only a fleck on a map of China but the case has once again exposed the multitude of problems in the banking system after a decade of exuberant growth. It also underscores why President Xi Jinping has made controlling financial risk one of his top three priorities.
If anything, the Wuwei case has shown that even a small place can make big trouble. There’s no public data about the branch’s deposits and loans but the 3 billion yuan involved in the fraud is more than double the city’s tax revenues for 2016.
Second, the branch’s supervisors, including the provincial head office and the headquarters in Beijing, appear to have had no control over what was going on at the local level.