China’s cash crisis includes big state-owned banks and people are scared. Where has the money gone?

it's becoming less safe to deposit cash in china's banks the entire banking system including the big four state-owned banks are now restricting withdrawals or online transactions china is likely to have a massive bank run which will collapse the banking and monetary system thus further devastating the chinese economy this is dan dong a city in the aoneng province a major heavy industry province in northeast china where people have been waiting in long lines at banks almost every day recently hoping to get their money because the line is so long local police have come to the scene to maintain order i went to the agricultural bank which had no money and i went to the dan dong bank which was so crowded that i left wondering if those people in line could finally take out their money this is dan dong bank it was like this yesterday every day is like this now some come early before the bank opens the queue has stretched into the afternoon look how many people are already here some have been in line for a week the bank is running out of money is one of the richest cities in china shenzhen where people are also standing in long lines at the entrance of the bank waiting to withdraw money people come and see this is the bank of china at 6 or 7 am people came to line up they haven't even had breakfast they came to the bank it's 10 o'clock now we are still in line the bank says they don't have any more numbers and they won't serve us chinese official media has indirectly confirmed that to a certain degree a bank run is happening in china the headquarters of the people's bank of china in shanghai said on june 20th that in the first half of june alone cash deployment was nearly four times that of the same period in 2021 however the bank didn't elaborate on whether the total amount of cash was sufficient to meet people's withdrawal needs the rush to withdraw money shows a serious loss of confidence in banks banks in china aren't financially transparent and neither is the government oversight but through the recent series of events we can still see this trend of declining trust from customers let's start with the latest incident on july 3 two agricultural commercial banks in the ning province were taken over by the shenyang agricultural and commercial bank previously an executive from one of the banks fled overseas but was later arrested according to the head of the china banking and insurance regulatory commission since 2021 liaoning province has taken detention and criminal compulsory measures against 63 heads of small and medium-sized banks chinese media reports that this means 83 percent of the small and medium-sized banks in liaoning are in trouble in early july the bank of nanjing in nanjing a wealthy city in eastern china in the richest city in jiangsu province was on the hot list of chinese social media the trigger was that on june 29th the bank suddenly announced the resignation of its chairman and president on july 1st the bank of nanjing again announced that it was introducing a new seal and that the original seal was scrapped and destroyed on the same day this is rather unusual as there have been no public reports of banks replacing their seals in china before it caused its share price to plunge on the same day rumors have it that the bank is about to go into financial ruin immediately the bank of nanjing issued an urgent statement to dispel the rumors chinese netizens responded by saying that the so-called rumors are often a prophecy for the future previously in late june agricultural bank of china limited or abc one of the big four banks in china suddenly restricted daily withdrawals to 1000 rmb or 150 us dollars without notifying its customers in advance here a customer asked the bank teller what law says you can limit my withdrawal to 1000 rmb a day what can i do with 1000 rmb the bank teller replied i don't set the limit it's automatically set by the system why am i now limited to 1000 rmb a day please explain the source of my money is legitimacy then do you have a residence permit i have a property certificate my house is here why do i need a residence permit why do i have to have a 1 000 limit when i come from another city what is the reason don't film i won't talk to you if you film according to which law you have to limit me to withdraw 1000 rmb a day what can i do with a thousand you want i don't set the rules it's automatically set by the system why is the system set up like this which law says you have to limit me to 1000 abc is one of the five largest state-owned commercial banks in china ranking third in terms of assets among chinese banks in 2018 it was ranked fourth in the world on the top 1000 global banks 2018 list published by the banker magazine with a tier one capital of u.s 218 billion it's a state-owned bank like this that has started to restrict customers withdrawals to 150 us dollars per day since april 2022 banks including agricultural bank of china shanghai pudong development bank and china everbright bank have issued announcements to lower transaction limits for some or all of their customers related to online business including personal online banking and app banking in addition to restrictions on online banking and transfers many bank depositors have also been restricted from making offline withdrawals in shanghai there have been crowds in front of many banks since the lockdown was lifted in june banks are limiting the number of users per day citing epidemic prevention as the reason elderly pensioners rushed to the bank at 2 am to line up but didn't necessarily get their money some people arrived at 5 00 am but couldn't even get a service number in shanghai now give out 300 service numbers every morning when all the numbers are gone there will be no more you see there's so many people to get a number you need to get here early at 8 00 am many people are here but the numbers are all gone so they can't get in depositors in shenzhen told overseas chinese media that it was no coincidence that banks are failing and that there had already been signs they said in june that the failure to withdraw money from atm machines was already common and it's been happening for months including in china's state-owned banks construction bank and agricultural bank it's no longer easy to take out money from the bank in many cities including shenzhen people's bank cards have suddenly become frozen for no reason they are suddenly locked once a bank card is locked a customer needs to submit a number of proofs such as a local residence permit in order to unlock it that is to say at any point the government can control the process and progress of unlocking one's bank card many people are waiting in the lobby of the bank to unlock their bank cards as they can't take out money not only the agricultural bank but also other state-owned banks such as the industrial and commercial bank of china suddenly locked up the bank cards of many depositors overnight in china's banking system based on the risk level from high to low there are peer-to-peer online platforms village banks agricultural commercial banks city commercial banks provincial local banks large joint stock banks and the big four state-owned banks now that state-owned banks are in crisis the bottom tier of village banks is even worse according to the chinese media eats high.com by the end of 2021 the number of village banks in china was 1651 accounting for 36 of the total number of banking and financial institutions in china since april 18th more than 400 000 depositors at six village banks in hunan and non-way have been unable to withdraw their deposits and an estimated 6 billion us dollars of depositors money has disappeared across china for details please see our last episode in this incident the government and the bank haven't yet given a clear answer to the depositors the health codes of victimized depositors from all over the country have been set as red codes by hunan officials to block them from coming to collect their money several videos surfaced on june 27th showing violent attacks by police officers who beat and arrested the victimized depositors there were also videos of the scene showing the majority of guards or police officers wearing white shirts without uniforms or police numbers one of the banks involved secretly opened the online banking system on june 26th which lasted for 15 minutes some depositors successfully withdrew their money during the period but for many of them the money was recovered by the bank system because it did not reach their accounts in time after the new spread chinese netizens suspected that this was a green light for a special crowd so that the powerful and wealthy ccp elite could escape first in a press conference on june 23rd the person in charge of the china banking and insurance regulatory commission said that the public security authorities had arrested a number of suspects and seized some of the assets involved in the case but still no mention of the deposit repayment issue the chinese public has begun to worry about the safety of their deposits one person said is my money still my money others suggest taking the money out and keeping it at home forget about the bank interest so why have china's banks become so insecure and where have all the vast sums of money gone the authorities have publicly acknowledged the cause being corruption on august 27 2021 a chinese court ruled that the former chairman of the hongfeng bank was involved in a case worth 10.3 billion rmb or 1.5 billion usd according to the official media tsai sheen the hong kong bank's loans are estimated to be 67.1 billion us dollars of which nearly 44.8 billion are overdue after offsetting through shareholders equity and deposit reserves the bank eventually reported 20.9 billion in non-performing loans the chinese government can easily offload its responsibility by acknowledging corruption in the banking system i believe that no one dares to deposit money in the bank in the future do you all know what happened in the industrial and commercial bank of china the senior management of icbc in guangxi south west china transferred the deposits of 28 depositors a total of 250 million rmb that is 37 million us dollars now this executive has been arrested but there are still 18 million u.s dollars unaccounted for the bank claims it was an employee's personal behavior and has nothing to do with the bank and the court ruling is the same that the bank has no responsibility to compensate chinese authorities have revealed that the underlying causes lie in the system the economic development model in china created by former communist party leader zhong zomin and his partner ching hong has had a particularly far-reaching impact between 1997 and 2012 when zhang zhou mean held de facto power china's financial sector developed into one of the country's most shady industries zhang also created china's unique real estate economy or a real estate pyramid scheme over the past two decades china's large banks have risen to prominence largely because of the huge profits made from land development through his son and grandson jian zomin and his faction hold enormous control over banks in china jiang's grandson jiang ji chang is truly the most powerful capital predator in china he graduated from harvard university with a degree in economics and later received a master's degree from columbia university chung worked for goldman sachs a wall street financial institution and established bow you capital a private equity fund in hong kong in 2010 boyu has made some amazing deals for example in just a year and a half after its inception it managed two big deals the ipos of alibaba in sindha international holdings most of the children of other powerful people in the communist party like the children of the jiung family have gone into financial institutions china's financial capital is in the hands of the so-called princeling party and a large part of the chinese economy is controlled by financial capital it can be said that after 2010 70 percent of the profit make up of the entire chinese listed assets was in sectors such as finance real estate brokerage and insurance which later declined but remains at around 50 percent in china's semi-annual report of a shares in 2021 in the top 10 of the most profitable list besides petrochina are seven banks and two insurance companies the banks controlled by the prince links have gone to speculate on land to make huge profits the four major state-owned banks in china controlled by the jiang faction have also been actively supporting the overseas mergers and acquisitions of large enterprises with the same factional background for example when haihong group which is now bankrupt rose to prominence it was backed by the bank of china in the industrial and commercial bank of china around 2017 haihong's overseas mergers and acquisitions totaled more than 40 billion us dollars in addition wanda group which had expanded massively overseas also had a debt ratio of more than 80 percent these overseas mergers and acquisitions and other financial operations resulted in the transfer of huge sums of money from china to overseas where it went into the private pockets of the ccp's powerful and wealthy to this day the xi jinping government is still working to eliminate the zhang faction from the financial sector on july 4 xiao jinhua a chinese canadian with nearly 6 billion u.s dollars in assets went on trial in mainland china xiao is the head of the tomorrow group which is seen as a white glove to zhang zhu means regime he was secretly arrested in hong kong in 2017. in 2020 three banks all members of xiao's tomorrow group were declared bankrupt by the government in recent years the ccp has introduced increasingly stringent controls over foreign reserves fearing that they may bottom out it is already evident to the chinese public that it has become very difficult to withdraw foreign currency such as u.s dollars from their accounts this also suggests that the communist party's financial system is extremely vulnerable at the moment on the other hand the land economy created during the jiongzomine era is gradually taking on a frighteningly lethal effect on the economy local governments rely on land revenue as the backbone of their finances sustaining themselves on inflated land prices large state-owned banks lend heavily to real estate companies and their upstream and downstream enterprises young people in china have invested generations of savings and high housing down payments and are saddled with enormous debt nearly three quarters of china's household wealth is tied up in real estate in august 2020 the xi jinping government issued the three red lines policy in an attempt to curb the real estate financial bubble the policy cooled china's hot real estate market instantly but it has also quickly slowed the economy with the debt crisis of evergrand being the first sign for a long time analysts have been worried that the collapse of evergrand the second largest property developer in china by sales could have a knock on effect on the entire real estate industry and spread to the financial system now this fear is becoming a reality we can see it in the recent account of a netizen who works for a bank in sichuan on china's jihoo a question and answer website like quora this user wrote that he started being in charge of loan approvals a month or so ago he found that loan approval had become a side job and his main job was to write all sorts of reports each report is written in such a way that makes him break into a cold sweat if the real situation is reported the bank's executives will be immediately interviewed by the regulatory authorities he said now the bank's loans can't be loaned out very very few can be recovered and most of them are short-term loans being transformed into long-term loans rolling down like snowballs to avoid the risk of concentrated exposure banks also use technology to change subprime loans to normal directly in the system without the principle and interest being paid the vast majority of non-performing loans he said are related to real estate this year despite the efforts of local governments to sell homes the volume of home sales has been halved year over year the number of defaulted homes in foreclosed homes has increased significantly according to the bank of china financial system risk control conference there are nearly 40 million units of defaulted homes and over 10 million units of foreclosed homes in china china's economy has entered a strange circle with real estate and related industries accounting for about 30 percent of china's gdp if the real estate sector is sluggish china's economic situation will deteriorate seriously which will directly threaten china's financial security and once a large number of small and medium-sized banks fail it will deepen china's economic crisis now the biggest headache for the beijing government is the awakening of the people china's banking system can barely cope when 10 of bank depositors are withdrawing cash the communist party's current push for digital money is partly an attempt to avoid a bank run however the advent of widespread electronic transfers will still lead to silent bank runs it seems likely that the risk of a bank run in china is rather real in the future [Music] you