China's Shocking Bank Declines Exposed: Crisis Imminent? How ‘June 4th’ Reshaped China And The World

New Data Released – Financial Collapse Imminent Hunan Bank Blast – Depositors Jailed for Demanding Savings 35 Years of Crumbling Without Collapse – Post-June 4th China's Magical Transformation It's all covered in today's China Truths. New Data Released – Financial Collapse Imminent The China Banking and Insurance Regulatory Commission last week released key banking and insurance sector figures for the first quarter of 2024. Independent media outlet Financial Truth analyzed the data, revealing that of the six major state-owned banks, only Postal Savings Bank of China's net interest margin exceeds the 1.8% redline. Others, like ICBC, sit at 1.48%, a steep 44.6% drop from 2021's 2.14%. Bank of Communications fares the worst, with a net interest margin of just 1.27%. At this pace, its margin will dip below 1% by year's end. Financial Truth forecasts that by the end of next year, all six major banks will teeter on the brink of losses, potentially triggering a major financial crisis. Warnings about the banking system's vulnerability have been sounded by experts and financial media since China's real estate bubble began to burst. Official figures show a staggering 40% of bank loans are tied to real estate, intensifying the pressure on banks. Self-media personality Zhai Shanying predicts that the next crisis in China will be in the banking sector, triggered inevitably by a collapse in real estate. He anticipates this crisis will arrive soon due to the government's recent decision to lift price controls on new homes. Describing it as a frightening policy, Zhai notes that many areas had previously mortgaged their lands to banks in exchange for funds. With banks now holding substantial land and property assets, removing price caps is expected to cause significant declines in real estate prices. This sharp reduction in the value of bank-collateralized lands and properties could lead to a liquidity crisis. Last year, financial writer Sobok provided an overview of China's financial situation identifying unfinished buildings, social stability, the fluctuation of the yuan exchange rate, and non-performing bank loans as the four major threats to China's financial stability. The authorities cannot address these issues simultaneously, and neglecting any one of them could signal the onset of a financial crisis. Hunan Bank Blast – Depositors Jailed for Demanding Savings In February this year, Changsha small business owner Ou Yangyun went to Zhengzhou to seek compensation after his bank account was frozen with tens of thousands of dollars. He planned to return in two days to celebrate Chinese New Year with his twin sons, but he remains unable to come home. A Reuters report on June 4 highlights this case as part of the biggest banking scandal in China. In February, 39-year-old Ou and about a dozen victims protested outside a Zhengzhou train station, demanding Hunan Bank give us back our deposits, as captured in a Reuters video. Sources say the group, dressed for winter, was followed and forcibly taken by bus to a police station after about 30 minutes. Detainees were often woken for interrogation between 1 a.m. and 5 a.m., and some were handcuffed. Most were soon released, having endured poor conditions such as being served moldy food and experiencing limited sleep, but Ou and two other defrauded depositors are still being held by Zhengzhou police. Ou's relatives tried unsuccessfully to locate him through calls and letters to the Zhengzhou police, leading them to fear he had died. Ou was detained on February 9, though his arrest notice was dated March 19. Reuters could not verify the reason for this discrepancy. The arrest notice accused Ou of picking corals and provoking trouble, a common charge against protesters in China. Currently, the families of Ou and other detained individuals are waiting to see the outcome of their cases, while other depositors are actively trying to recover their savings. Two out of five sources, along with another informed individual, reported that over 1,000 people have not yet received compensation. One depositor declared, This money represents my family's entire savings, earned through hard work. I will not give up. The report, based on videos, unseen arrest records, and interviews with five insiders, sheds light on economic protests in China since 2022, a period in which hundreds of thousands of Chinese have lost homes in a property bust and fallen victim to investment scams. Interviewees, fearing government retaliation, remained anonymous. Official agencies did not respond to inquiries about the detainees. Government Unable to Address Gradually Worsening Crisis The crisis for depositors began around two years ago when a $4.2 billion fraud case involving four Hunan Province banks resulted in about 600,000 people losing their deposits. This incident sparked concerns about the stability of rural banks. Experts told Reuters that the unusually harsh treatment of Ou and two others reflects the heightened sensitivity of Chinese officials to financial dissent. Peter Dallin of Safeguard Defenders, a group monitoring human rights in China, said that detaining someone for four months for a peaceful protest highlights the government's incapacity to handle this escalating crisis. Freedom House's China Dissent Monitor reported that economic protests in the fourth quarter of 2023 increased by 127 percent, totaling 805 incidents, including protests over unpaid wages, unfinished apartments, and investment fraud. Meanwhile, Andrew Collier from Orient Capital Research in Hong Kong noted that the central government is keen to suppress these protests to avoid large-scale unrest during economic downturns. The China National Financial Supervision and Administration Commission did not respond to inquiries about the fraud or the ongoing investigations. 35 Years of Crumbling Without Collapse – Post-June 4th China's Magical Transformation For contemporary Chinese people, the June 4th incident remains an insurmountable hurdle. Thirty-five years ago, the Chinese Communist Party mobilized its national defense forces, employing tanks and machine guns to crush the pro-democracy demonstrations of tens of thousands of Beijing citizens, leaving the world in shock. Despite continued economic growth and reforms in the aftermath, this brutal suppression significantly altered how an entire generation viewed the CCP. Why did this happen? What were the repercussions for the CCP and Chinese society? How does it influence the reshaping of international order and future geopolitics? Let's dive into the analysis of experts from NTD's Elite Forum. Transformation in the Relationship Between Chinese People and the CCP Ms. Guo Jun, editor-in-chief of Epoch Times, stated that the 1989 Tiananmen massacre drastically altered the relationship between the Chinese Communist Party and the citizens, particularly the intellectuals. Before the 1989 democracy movement, most young Chinese were reform-minded, supporting CCP rule while pushing for better societal systems. However, the brutal suppression turned many into revolutionaries, convincing them that genuine reform is impossible under the CCP, a belief that has intensified over time. The Tiananmen massacre remains a current issue, not just historical, as the CCP's governance style and worldview remain unchanged. The ongoing conflict between the Chinese people and the CCP, especially with the intellectual elite, has only deepened, likely influencing China's future significantly. Over the last few decades, the university students from that period have gradually assumed control of significant societal resources. This elite group, once students in the 1980s, will play a critical role in shaping China's future as Xi Jinping's generation phases out. Furthermore, Ms. Guo also noted that the Tiananmen incident reshaped the global political landscape, precipitating the fall of communist regimes in Eastern Europe and the end of the Cold War with the dissolution of the Soviet Union in 1991. From 30 communist nations in the late 1980s, only four remain today, underscoring the transformative impact of the Tiananmen Square incident. Moreover, the Tiananmen event marked a turning point in China's relationship with the West. Starting in 1972, the CCP began distancing itself from the Soviet bloc and by 1979, aligned with the Western camp, opposing its former allies. Throughout the 1980s, the West supported the CCP across various domains. However, after 1989, Western support shifted, first ceasing military aid, then increasingly opposing the CCP on human rights and ideological grounds, though major strategic international cooperation continued until shifts occurred post-2018. Tiananmen massacre did not impact economic growth, but altered wealth distribution. Ms. Guo points out that despite rapid economic growth following the Tiananmen massacre, the CCP's claim that the massacre was necessary to prevent chaos and spur economic development doesn't make sense. She argues that the idea that suppressing the protests was essential for economic progress is fundamentally flawed. Before any event, the outcomes are countless, and suggesting a single path—disaster without strict control—is typical of authoritarian propaganda. This approach is also evident in the repression of groups like Falun Gong, where the government promotes the unfounded fear that Falun Gong gaining power would have catastrophic results, even though Falun Gong has never pursued such power. Relying on such hypothetical scenarios to justify actions is both baseless and irrational. Turning to China's economy, it's undeniable that the country has made remarkable strides over the past three decades. Two pivotal factors have fueled this growth. First and foremost is the Chinese people's unwavering drive for prosperity. Their work ethic, resilience, and entrepreneurial spirit have been the driving force behind economic development. This phenomenon isn't unique to mainland China. It's also evident in regions like Taiwan, Hong Kong, and Singapore, where ethnic Chinese communities have similarly experienced rapid economic advancement. The second factor lies in the distinction between the monetization of China's economy and the GDP's reflection of economic activity. Prior to the 1990s, many sectors of the Chinese economy operated outside the realm of monetary exchange and thus weren't accounted for in GDP calculations. Take, for instance, housing, healthcare, and education. These sectors existed but weren't quantified in monetary terms, leaving them out of the GDP equation. However, the landscape shifted with the reforms of the 1990s. These sectors underwent monetization, becoming part of the GDP calculus and significantly boosting China's economic growth figures. In essence, economic modernization is a process of monetization. China embarked on this journey in the late 1990s under Zhu Rongji's leadership, marking another pivotal moment that propelled a surge in the country's GDP. Miskwas stated that China was inherently a market economy. It was only after the Communist Party took over that it introduced nationalization, which shifted an initially market-based and monetized Chinese economy towards a non-market and non-monetized model. Thus, the reforms initiated after the opening up were essentially a reversion, not an advancement. This approach to reform was already outlined by Zhao Ziyang before the Tiananmen Massacre during the 13th National Congress of the CCP in 1987, so it cannot be considered an outcome of the Tiananmen crackdown. Therefore, she believes that the CCP's assertion that the Tiananmen suppression was pivotal for economic development is utterly baseless and intentionally misleading. Also in the forum, Wang Hengtao, chairman of the China Democratic Party, noted that the 1989 suppression shifted China's economic growth pattern, affecting wealth distribution and opportunity. Despite economic growth averaging about 10% annually both before and after 1989, the suppression changed the nature of development. Initially, reforms benefited the poorest, improving conditions for farmers and then urban and rural low-income groups. By 1989, as wealth grew, there was a push for political participation, acknowledged by former Premier of China Zhao Ziyang, who realized that without political reform, economic progress might falter. He attempted to introduce a social consultation and dialogue mechanism, despite Deng Xiaoping imposed restrictions, forbidding discussions on the separation of powers or the adoption of Western democratic models at the 13th National Congress. Therefore, Wang believes that the year 1989 was a pivotal moment when emerging social forces, empowered by economic gains, wished for the Communist Party to share political power, enabling a collective discourse on the nation's development. Wang posits that had the Tiananmen Massacre not occurred in 1989, and the pre-1989 dialogue and consultation model been allowed to continue, China's economy would not only have sustained its high-speed growth, but the developmental benefits and opportunities would have been more equitably distributed. Society could have remained content, with open and free expression prevailing. However, the 1989 crackdown altered this dynamic. While the economic growth rate may have remained unchanged, the nature of development shifted to one characterized by high-pressure governance, with a minority of elites monopolizing the benefits and opportunities, leaving the majority to bear the economic costs in an increasingly corrupt society. This shift is the legacy of the 1989 crackdown on economic development, marking three decades of distorted and intense growth that have also set the stage for potential political unrest and backward steps in development. Politicians' interests sparked transformations, signaling the demise decline of autocracy. In the same forum, senior editor Shershan brought up the topic of authoritarian regimes in Asia that often change due to internal oppression. This has been evident in incidents such as Taiwan's Kaohsiung Incident, South Korea's Gwangju Uprising, and the assassination of Aquino in the Philippines, all of which were catalysts for political change in those countries. He highlighted that the Tiananmen Square Massacre is an exception, which still remains as an unresolved historical debt and a burdensome legacy for the Chinese Communist Party. Shershan said that he heard a story about someone who made a bet with a nationalist in China. The person said, You claim there's freedom of speech in China, so I'll give you a photo. If you dare to post it, I'll admit there is freedom. He then sent the nationalist a photo of the Tiananmen Square tanks. Not realizing the significance of the photo, the nationalist thought nothing of it and posted it. As a result, his entire account was immediately frozen. Ms. Guo described the CCP's rule as an extreme form of autocratic governance, deeply entrenched with an ancient mindset of despotism that prevents any real political negotiation. She cited the Tiananmen Square Massacre as proof that the CCP resorts to violence as the only solution to public dissent. This approach has been consistent across China, where even local governments now freely use force in various disputes, such as those involving demolition compensations, with no negotiations allowed. The CCP considers this method highly effective and views it as an institutional advantage essential to China's ascent. Mr. Wang Huntao discussed how world transformations often do not demand high moral pursuits from people but arise from power dynamics with a powerful act and self-interest. He used the example of Mikhail Gorbachev, who dissolved the Soviet Union in response to a coup to save his own life. Similar situations occurred where secondary leaders initiated reforms to take over leadership, or military leaders in Egypt and Indonesia chose to side with the public not out of affection for them but to avoid the fate of their predecessors, like Mubarak and Suharto. These leaders believe that, at least morally and in future historical accounts, it was better to stand with the people now. The people might even regard them as great leaders because of this action. Mr. Wang said, politicians are highly pragmatic when weighing reality. When people chase their interests logically and sensibly, interests that align with their conscience, they naturally gravitate toward democracy. Autocracy is ultimately doomed to fail, just as Mr. Wu Ping, a prominent Chinese dissident and political theorist, noted, they might win a thousand times, but a single defeat means their downfall. We, on the other hand, might face a thousand defeats, but just one victory ensures our complete triumph. Mr. Wang concluded that the fall of the Communist Party is inevitable due to inherent flaws in its system. He predicted that ambitious insiders won't hesitate to destroy the party to advance their own political interests. Thus, political transformation does not require everyone to be noble. It only takes a few enlightened individuals to lead the way while the majority remain unaware. These torchbearers are enough to inspire change. Don't forget to leave a comment in the section below to share your opinions on today's topic with us. Make sure to like and subscribe to see more interesting topics from China Truths.