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Weapons of Mass Destruction (WMD)

Radio Free Asia

Arrests, Calls For Calm Amid Run on Bank in China's Liaoning

2019-11-08 -- Authorities in the northeastern Chinese province of Liaoning have detained nine people for "rumor-mongering" and called for calm after local people lined up to withdraw money from the Yingkou Coastal Bank, the second such run on the bank in nine days.

"Recently, some individuals posted false statements about the Yingkou Coastal Banks online, and police have dealt with them strictly in accordance with the law," the Yingkou municipal government said in a statement on its website.

Staff at at least one branch of the bank were on duty round the clock to serve customers wishing to withdraw money amid fears that the bank was underfunded.

A Yingkou resident surnamed Zhao said the Panpan Road branch had long lines of customers waiting late into Wednesday evening and on Thursday.

"There are a lot of people in my acquaintance who had their savings there and have now taken them out," she told RFA. "They say it is all rumors, but ... there is no smoke without a fire."

She said people were treating the government's attempts at reassurance with disregard, amid reports of a major problem involving one of the bank's shareholders.

"It's not safe to leave the money in there, so [they are] taking it out," Zhao said.

The local government also posted media reports from the state-run Yingkou Daily newspaper, seeking to reassure people that their money was in no danger.

Sun Rong, deputy general business manager at Yingkou Coastal Bank, was quoted as saying that the bank is still allowing customers to withdraw and deposit money freely.

"We are now back to business as usual," Sun said on Thursday. "Public concerns have been allayed."

Pan Hongyan, a lobby manager a Yingkou Coastal Bank sub-branch, told the paper that the numbers of people lining up to withdraw money were gradually reducing.

"Our branch operations are now stabilizing," Pan said. "We hope that our customers won't pay attention to rumors, but our branches will go all out to meet their needs."

A bank employee who spoke to RFA said people were still waiting in line on Thursday.

"Now that we have clarified the situation, the run may continue for a few days, but the situation is already improving," the employee said, adding that many of those lining up to withdraw funds were older people who tended to prefer to use cash.

The Yingkou government said that all deposits of up to 500,000 yuan (U.S. $71,469.41) are guaranteed under current deposit insurance requirements.

"All banking financial institutions in the jurisdiction of Liaoning province, including Yingkou Coastal Bank, have participated in the deposit insurance scheme, and all deposits under its jurisdiction are protected by it," the government said in a statement.

Local residents said many more people than nine had been detained, although the total was unknown.

An employee who answered the phone at the Yingkou police department declined to comment, saying they didn't have the details.

The run on Yingkou Coastal Bank comes amid growing concerns over the amount of debt carried by local governments and financial institutions in China.

The International Monetary Fund warned in May that overall corporate debt remains high in China, and that the proportion of speculative-grade debt is economically significant.

It cited government intervention in three small regional banks as evidence of risks within the country's financial system, Caixin News reported last month.

Regulators took over Baoshang Bank Co. in Inner Mongolia in May. Two months later, large state-owned financial institutions purchased minor
stakes in the Bank of Jinzhou, while Hengfeng Bank received a capital injection from a unit of China's sovereign wealth fund in August, Caixin reported.

A financial journalist surnamed Zhu said the bailouts were significant when it came to considering the run on Yingkou Coastal.

"This has happened before, for example with Baoshang Bank," she said. "Poor economic performance across the whole of China this year means that many small businesses have gone to the wall, and the banks that lent to them must have been saddled with a lot of bad debt."

She said part of the problem is a general lack of transparency, leading to "negative psychological effects."

"The banks won't say what their exposure is; it's not just the banking industry, but elsewhere too," she said. "Regardless of the problem, you can't talk about it."

Reported by Ma Lap-hak, Fok Leung-kiu, Wong Siu-san and Sing Man for RFA's Cantonese Service, and by Wang Yun for the Mandarin Service. Translated and edited by Luisetta Mudie.

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