China’s banking system begins to crack at its grass roots as two bank runs take place within a week
- Local governments and police in both Hebei and Shanxi provinces were forced to intervene after rumours concerning Baoding Bank and Yangquan Commercial Bank
- China is hoping to rely on its small lenders amid the fallout from the coronavirus to provide funds to small factories and farmers
China’s US$40 trillion banking system is seeing growing signs of trouble at its grass roots with bank runs happening at two small local lenders last week, a sign that a mountain of debt and an unprecedented economic contraction has started to take a toll.
Local governments and police in both Baoding city in Hebei province and Yangquan, a coal mine town in Shanxi province, last week pleaded with customers not to withdraw cash from local banks despite various unsubstantiated rumours.
On Saturday, the city of Baoding said on its official WeChat account that Baoding Bank was operating normally and people “should not believe in or spread rumours … and should jointly be safeguarding good financial and social order” after a group of depositors rushed to withdraw money from the bank.
Local police issued a statement saying it had arrested two individuals for spreading rumours that led to “panic among the public”.
Three days earlier, the government and police in Yangquan were forced to issue a similar statement after local depositors rushed to Yangquan Commercial Bank.