Hundreds more arrested in China’s rural banking scandal

Police in Xuchang say criminal gang seduced depositors with very high interest rates of at least 13 per cent
Suspects accused of involvement in a snowballing crisis that has sparked protests

China society

Phoebe Zhang

Published: 7:00am, 30 Aug 2022

Why you can trust SCMP

Police in central China’s Henan province have arrested more than 230 people suspected of involvement in a massive rural banking scandal.

“The criminal gang, headed by Lu Yi, illegally took control of four rural banks, including Yuzhou Xinminsheng Village Bank, and are suspected of committing a series of severe crimes,” the public security bureau in the city of Xuchang said on Monday.

The gang lured depositors with unusually high annual interest rates of 13-18 per cent, police said, without offering details.

Police said 234 people were arrested and work to recover the lost funds was under way.

04:47

Victims of one of China’s worst financial scandals attacked by unidentified men in white at protest

The arrests are the latest in a huge financial scandal that has left thousands of depositors across the country without access to tens of billions of yuan in frozen funds, igniting months-long protests.

In one case in June, authorities in the provincial capital of Zhengzhou tried to quell protests by assigning a red health code to the depositors.

Red codes designate people who have been to areas with reported cases of Covid-19 and prevent them from travelling, checking into hotels and entering any public buildings.

Demonstrators who defied the red code to protest were beaten by thugs, taken away by local police and sent home.

Five officials and civil servants in Zhengzhou were later fired or punished for abusing the health code system.

05:06

Explainer: How China’s Covid-19 health code system works

Faced with growing discontent, authorities began to repay depositors from mid-July, starting with those who had less than 50,000 yuan (US$7,227) at the institutions. The government incrementally rolled out repayments for those with higher deposits.

Some depositors previously told the Post that it took repeated attempts to withdraw their money.

Those with higher savings said they were still waiting, and were growing increasingly sceptical about the Henan government.

One woman with 1.11 million yuan (US$161,000) in the banks said on Monday that according to the Henan banking regulator, those with more than 500,000 yuan in deposits would be paid 500,000 yuan, with the rest meted out depending on the outcome of investigations and fund recovery efforts.

The woman said she had two deposits at the bank – one amounting to 510,000 yuan and another 600,000 yuan. She said she had not started the application process because she worried that she would only receive at most 1 million yuan.

Furthermore, she said she had lost confidence in the Henan government after all of its excuses in the past three months.

“Even if they retrieve 10 billion yuan, what if they just told us that they only retrieved 1 billion yuan?” she said.