Evergrande bankruptcy fears spark a bank run in China

[Hamartia Antidote]

Evergrande bankruptcy fears spark a bank run in China

One of heavily indebted Chinese property developer Evergrande's local lenders displayed this week a “cash wall” of renminbi notes at its office after

asiatimes.com

Depositers queue up in recent days at the Bank of Cangzhou's head office in Hebei province.

One of heavily indebted Chinese property developer Evergrande’s local lenders displayed this week a “cash wall” of renminbi notes at its office after depositors queued up to withdraw their deposits in what could be the front edge of a bank run crisis in China.

Hundreds of people have queued up at the Bank of Cangzhou’s head office in Hebei province to get their deposits out of the bank since October 7, according to photos and videos circulated on social media.

The mini-run came after netizens circulated a post that claimed dozens of Chinese banks would need to write off their loans if Evergrande went bankrupt. According to the social media post, Evergrande owes Cangzhou Bank about 3.4 billion yuan (US$466 million). Asia Times could not independently confirm the figure in time for publication.

The Bank of Cangzhou said its outstanding loans to Evergrande and its affiliates amounted to only 340 million yuan as of October 6, or one-tenth of the amount claimed in the widely circulated social media post. It said it had sufficient lands and properties as collateral to cover any Evergrande-related losses.

“The overall risk is controllable and will not have a significant impact on the bank’s operations, management and asset quality,” it said.

However, Chinese media reports said the bank’s statement and “cash wall” have so far failed to assuage its depositors. In China, “cash walls” are commonly seen at corporate events such as the delivery of annual bonuses.

A cash wall built with piles of renminbi notes Photo: Weibo
Meanwhile, transparency concerns are rising. Police in Cangzhou said they arrested several people for allegedly spreading rumors that the Bank of Cangzhou will soon go bankrupt.

Earlier hopes that Evergrande can avoid bankruptcy are diminishing as Hong Kong’s High Court will hold a hearing on a liquidation case filed by Evergrande’s offshore creditors on October 30.

To assuage concerns the ongoing property crisis may threaten China’s financial stability, the State Council said in a guideline on October 11 that it will help urban commercial banks and rural financial institutions dispose of bad assets and loans while also replenishing their capital through multiple channels.

“Consumers should make rational judgments and avoid being affected by rumors and losing their interest income,” the People’s Bank of China (PBoC), former China Banking and Insurance Regulatory Commission and the local government’s financial management office in Suning in Cangzhou said in a joint statement.

The statement said the Bank of Cangzhou had total assets of 245.6 billion yuan at the end of September, made a net profit of 1.21 billion yuan last year and had recently paid 600 million yuan in taxes. It said the bank’s financial situation is healthy and stable.

The statement added that the bank’s depositors are also well-protected by China’s deposit insurance scheme, which guarantees that a depositor can be compensated up to 500,000 yuan if their bank goes bankrupt.

“While all banks in China contribute to deposit insurance, the nation protects the safety of people’s deposits in the form of legislation,” a Hunan-based writer says in an article. “Deposit insurance is guaranteed with the country’s credit, which is the highest level of credit at this stage.”

He says if people still lack confidence in small banks, they should deposit their money in large state-owned banks instead.

A Henan-based columnist who writes under the Ku Ge pen name says the Bank of Cangzhou may collapse due to rumors rather than Evergrande’s unpaid debts, which he argues is a minor issue. He notes that even a bank as big as the Industrial and Commercial Bank of China would not survive if all its depositors suddenly withdrew their money.

Chinese commentator Shi Shan says in a YouTube video released on October 13 that the collapse of any Chinese property developer will accrue as bad assets in banks. He claimed that large banks still have enough cash on hand at the moment but smaller ones may have to ask their depositors to wait for withdrawals.

‘Technical’ divorce​

On September 28, Evergrande said in a filing to the Hong Kong stock exchange that its chairman, Hui Ka-yuan, is now “subject to mandatory measures in accordance with the law due to suspicion of illegal crimes.”

Earlier, Bloomberg reported that Hui was under police surveillance. Chinese commentators said if Hui faces penalties, it will probably be due to the inability of Evergrande’s wealth management unit to repay its investors.

But the matter seems to be much more complicated.

The 21st Century Business Herald reported on September 28 that financial regulators were concerned by Hui’s “technical” divorce from his wife Ding Yumei.

The report said Evergrande had delivered about 90 billion yuan of dividends to its shareholders over the past many years while the couple received a majority of it through their offshore companies registered in the British Virgin Islands and the Cayman Islands. It said this money is now controlled by Ding after the couple’s divorce.

“Hui had said in a high-profile speech in 2021 that he could lose everything but would not allow his employees ‘lying flat’ (in the delivery of properties to homebuyers),” a corporate governance expert was quoted as saying in the report. “But he was actually saying one thing and doing another.”

The couple reportedly divorced last year. Ding was no longer listed as Hui’s spouse in Evergrande’s filing in August this year and had left Hong Kong in late July. She holds a Canadian passport.

When Evergrande’s debt crisis became apparent in 2021, it was ordered by Beijing to make property delivery its top corporate priority. Hui was also forced to sell his luxury yacht, villa and aircraft to repay Evergrande’s debts.

But at the end of last year, the company still had net current liabilities of 687.7 billion yuan and total liabilities of 2.44 trillion yuan. It has been further hit by falling home prices this year.

Evergrande still has 1.62 million unfinished apartments, which affect more than 5 million people, according to Chinese media reports.

 

[RoadRunner401]

18 Trillion dollars plus Chinese economy growing at 5% is going Bankrupt? Same people will tell you Indian 2 trillion dollars Indian economy growing at 6% is booming? W. T. F , please give it a rest with this propaganda bull...

 

[Hamartia Antidote]

18 Trillion dollars plus Chinese economy growing at 5% is going Bankrupt?

W. T. F , please give it a rest with this propaganda bull...

Are you clueless? Can you read at all? Do you know what a bank is or how they work?

Let me explain the article since it obviously went over your head.

It doesn't say China is going bankrupt. It says some of the small banks that loaned Evergrande money had nervous customers who were worried their deposits (parts which were given to Evergrande as loans) would be completely lost if the bank had to write off the Evergrande loans as "uncollectible debt".

The Chinese government only insures about 500,000 yuan of people's bank money..that's about $70,000. Any amount over that and you are out of luck if the bank fails.

I'm sure anybody who had more than $70,000 was in the Bank of Cangzhou making sure to withdraw out the difference while others didn't want to deal with any future headaches and simply withdrew it all after hearing this:

He says if people still lack confidence in small banks, they should deposit their money in large state-owned banks instead.

Can you comprehend this or is it just too complicated for you to understand?
Why are you talking about the Chinese economy going bankrupt???

---

Don't you think people in Pakistan would be lined up at a local bank if they found out their local bank had millions in loans that may need to be written off. Only a few days ago the State Bank of Pakistan was warning depositors:

Oct 04, 2023

Amid economic uncertainty: State Bank warns you could lose your deposits in banks

The Deputy Governor of the State Bank of Pakistan has warned depositors that only amounts up to five lakh rupees are legally protected in banks in Pakistan. Here's what depositors can do to protect their savings.

www.samaa.tv

The deputy governor of the State Bank of Pakistan (SBP) has warned depositors that only amount up to Rs0.5 million (or 500,000 rupees) are legally protected in banks in Pakistan.

This means that if a bank fails, depositors with more than this amount in their accounts will not be guaranteed compensation.

 

[RoadRunner401]

No I don't know how banks work please let me know, if collapse of a bank is any indication of falling economy than I suppose this means USA is long Bankrupt
American banks that closed:
Heartland Tri-State Bank of Elkhart, Kansas became the fourth Federal Deposit Insurance Corp. (FDIC) bank to fail this year.

Earlier in the year Silicon Valley Bank failed March 10 and then Signature Bank failed two days later, ending the unusual streak of more than 800 days without a bank failure.

Before Heartland Tri-State Bank failed Friday, First Republic Bank was the most recent bank failure May 1.

 

[Hamartia Antidote]

if collapse of a bank is any indication of falling economy

Would you stop worshipping China's dick so hard you are reading more into a story than what it actually says. People here like to talk about "blind white worshippers" all the time but keep skipping over the other worshippers who are just as bad.

Nothing in the story is saying this is an indication of China's economy collapsing.

Do you want to also say this article is inferring there is a decrease in Whale populations?

Please read articles carefully before replying...and calm down...sheesh.

 

[beijingwalker]

Total BS, never heard anyone lost even one cent from any banks in China in my whole life, western media is just going crazy and spewing senseless non sense about China on daily basis now.

 

[epebble]

18 Trillion dollars plus Chinese economy growing at 5% is going Bankrupt? Same people will tell you Indian 2 trillion dollars Indian economy growing at 6% is booming? W. T. F , please give it a rest with this propaganda bull...

Banks going bust is not the same as economy is kaput. We had dozens of banks failing in 2008 while still having the strongest economy. Bank is just yet another business. If you make too many losses, you close down. If the sum of all losses exceeds bank's capital, it is underwater.

 

[Hamartia Antidote]

Total BS, never heard anyone lost even one cent from any banks in China in my whole life, western media is just going crazy and spewing senseless non sense about China on daily basis now.

You don't have to lose money...your accounts could be frozen and you would have to wait for the government to unfreeze it and reimburse you...which likely wouldn't be 5 minutes.

People in this thread really have zero common sense.

 

[beijingwalker]

You don't have to lose money...your accounts could be frozen and you would have to wait for the government to reimburse you...which likely wouldn't be 5 minutes.

People in this thread really have zero common sense.

I have never had my accounts frozen and I know no one who had in China. Is that common in US?

 

[Hamartia Antidote]

I have never had my accounts frozen and I know no one who had in China. Is that common in US?

2022

White-shirted group attacks protesters at China bank scandal demonstration

Victims of what could prove one of the country’s worst financial scandals had gathered in Henan province to demand their frozen deposits be returned.

www.scmp.com

An estimated 1,000 depositors gathered in front of the Zhengzhou sub-branch of the People’s Bank of China on Sunday morning, in a latest attempt to recover millions of yuan frozen in rural banks.

 

[beijingwalker]

2022

This once in several decades isolated incident has been posted by you for so many times already, it's a scam and the culprits had been arrested and people got them money paid back by the government. How often banks go bankrupt in US?

 

[Hamartia Antidote]

This once in several decades isolated incident has been posted by you for so many times already, it's a scam and the culprits had been arrested and people got them money paid back by the government.

So now you are magically suddenly backtracking your statement:

I have never had my accounts frozen and I know no one who had in China.

 

[beijingwalker]

So now you are magically suddenly backtracking your statement:

What? what are you talking about? I have never had my accounts frozen and I know no one who had in China.what backtracking?

 

[Hamartia Antidote]

What? what are you talking about? I have never had my accounts frozen and I know no one who had in China.what backtracking?

The people from the 2022 incident had their bank accounts frozen and were protesting that even though their accounts were insured they were still waiting and waiting and waiting for the Chinese Government to unfreeze their accounts and compensate them.

In the situation in the OP some of the people were likely running to the Bank of Cangzhou because even though they are guaranteed by the Government to get their money..they may find themselves in a similar situation where if the bank fails they may have to wait to be compensated.

This doesn't have anything to do with China's economy or "spewing senseless nonsense".

 

[Zsari]

The people from the 2022 incident had their bank accounts frozen and were protesting that even though their accounts were insured they were still waiting and waiting and waiting for the Chinese Government to unfreeze their accounts and compensate them.

In the situation in the OP some of the people were likely running to the Bank of Cangzhou because even though they are guaranteed by the Government to get their money..they may find themselves in a similar situation where if the bank fails they may have to wait to be compensated.

This doesn't have anything to do with China's economy or "spewing senseless nonsense".

The two banks in 2022 were involved in a criminal investigation as bank executives misappropriated customer's deposit and fled, and hence accounts were frozen. Where did you get that these accounts were insured? There is no FDIC like insurance in China, and the Chinese government is certainly not responsible to compensate loss from small private banks which wouldn't even be eligible for FDIC insurance in the states in similar circumstance.
BTW, the Bank of Cangzhou is basically a credit union, so no, they won't have FDIC insurance either.