China Protesters Demand Back Billions Tied to Suspected Scam




  • In Business
  • 2022-05-26 02:21:10Z
  • By Bloomberg
 

(Bloomberg) -- Hundreds of people took to the streets of the largest city in China's Henan province this week, calling on authorities to ensure the return of tens of billions of yuan invested in what could be one of the nation's largest financial scams.

Most Read from Bloomberg

  • Fed Saw Aggressive Hikes Providing Flexibility Later This Year

  • Biden Demands US 'Stand Up' to Gun Makers After Texas Attack

  • Plot to Kill George W. Bush in Revenge for Iraq War Was Foiled, FBI Says

  • Why So Few Big Rats Have Fled Putin's Ship

  • Stocks Climb in Volatile Session After Fed Minutes: Markets Wrap

Protesters gathered outside the local office of the China Banking and Insurance Regulatory Commission on Monday in Zhengzhou city, carrying signs that read "Return my savings," according to half a dozen people familiar with the matter, who asked not to be named discussing a sensitive subject. The crowd was dispersed by police and told to return home as soon as possible, the people said.

The protest, unusual for China, followed a freeze in online and mobile cash withdrawal services by four banks in Henan. A subsequent probe found that Henan Xincaifu Group Investment Holding Co., a private investment firm with stakes in all four lenders, colluded with bank employees to illicitly attract public funds via online platforms, the CBIRC said in a written response to questions.

At least tens of billions of yuan in funds were involved, according to a person with direct knowledge of the matter who asked not to be named discussing internal information. The investigation is ongoing and it isn't clear whether the funds are missing.

"Waiting is very painful since we haven't received any response on how regulators will deal with our savings," said Chris, who bought about 400,000 yuan ($59,693) worth of deposit products from one of the banks. "What's worse, we are quite concerned that our savings would be regarded as illegal investment products." Chris asked to only be identified by her first name as she fears reprisal for speaking publicly.

The CBIRC said it's "highly concerned" about the situation and vowed to severely punish any financial crimes.

Consumers should choose official channels for financial business and beware of false propaganda such as "high interest" and "high yield," the regulator said. Deposit and withdrawal services through branches at the banks -- Yuzhou Xinminsheng Village Bank, Shangcai Huimin County Bank, Zhecheng Huanghuai Community Bank and New Oriental Country Bank of Kaifeng -- are normal, the CBIRC said.

All four banks weren't immediately available for comment when reached by Bloomberg. Xincaifu Group, which specializes in corporate investment and management, had its business license revoked in February, according to company registration information, and couldn't be reached for comment.

The incident highlights the risks associated with efforts by the nation's small lenders to attract funds from outside their limited home bases through partnerships with non-proprietary online platforms. The central bank last year banned lenders from conducting such "innovative" deposit services, citing the need to "safeguard the pockets of ordinary people."

The protest also risks renewing doubts over the financial strength and corporate governance of nearly 4,000 rural Chinese lenders that collectively control $7 trillion of assets. Confidence in the country's smaller lenders has waned since 2019, when the government seized a bank for the first time since 1998 and imposed losses on some creditors.

Depositor concerns over the safety of savings at smaller Chinese banks led to several protests in 2020. More recently, the troubles at real estate developer China Evergrande Group have sparked protests in cities across the country.

China's largest case of financial fraud was in 2016, when the Ezubo P2P lending platform defrauded more than 900,000 people out of the equivalent of $7.6 billion. The firm was fined about 1.8 billion yuan a year later and its owner was sentenced to life imprisonment.

China has disposed of 2.6 trillion yuan worth of bad debt at more than 600 rural banks classified as high-risk over the last few years, and injected 133.4 billion yuan of capital into 289 rural lenders, according to the regulator. Authorities are also considering raising several hundred billion yuan for a stability fund to bail out troubled financial firms.

(Updates with investor comment in the fifth paragraph.)

Most Read from Bloomberg Businessweek

  • Mark Zuckerberg Is Blowing Up Instagram to Try and Catch TikTok

  • Elon Musk's 420-Degree Edgelord Pivot Is Getting Stale

  • Deadly Heat in India Is a Warning of Global Catastrophes to Come

  • Open With Care: That Next Power Bill Could Shock You

  • The Thrill of Better Office Wi-Fi

©2022 Bloomberg L.P.

COMMENTS

More Related News

World
World's Most Aggressive Central Bank Raises Key Rate to 200%

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.Most Read from BloombergRussia Defaults on...

Meta Plunge Lures Value Buyers as Growth Funds Flee
Meta Plunge Lures Value Buyers as Growth Funds Flee

(Bloomberg) -- For years, investors valued Facebook's parent company as if its growth would never falter. Now that it has, fund managers who buy cheap, out...

G-7 Latest: Oil-Price Cap in Focus as Zelenskiy Addresses Summit
G-7 Latest: Oil-Price Cap in Focus as Zelenskiy Addresses Summit

(Bloomberg) -- Group of Seven leaders will discuss the viability of a price cap on Russian oil as talks in the Bavarian Alps again focus on Ukraine, with...

EU Confronts Low Gas Storage Risk in Test of Unity on Russia
EU Confronts Low Gas Storage Risk in Test of Unity on Russia

(Bloomberg) -- European Union governments are confronting the risk of a splintering energy market as Russian cuts in natural-gas supplies test the bloc's...

Russia
Russia's Default Tussle With Investors Is Just Starting (Repeat)

(Bloomberg) -- (This story was originally published June. 7. On Sunday, the grace period on about $100 million of interest payments due May 27 expired, a...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business