Zhengzhou, (Asian independent) The ruling Chinese Communist Party (CCP) is moving to dampen concerns about a banking crisis amid an ongoing mortgage repayments strike and widespread protests over frozen accounts at rural banks, RFA reported.
Economic commentator Jin Shan, a pseudonym, said the restrictions on cards does point to an underlying crisis in China’s financial system.
“The financial system has poor capital turnover and can’t cope with demand for liquidity,” Jin told RFA. “In the background is the bigger picture of the long-term economic downturn, caused by (the zero-COVID policy).”
“This fatal blow to the economy results in a loss of (liquidity), as well as making bank deposits fall at the same time.”
Jin said restrictions on withdrawals could fuel a systemic banking crisis in China, with the real estate industry at the heart of the issue, RFA reported.
Several cities in the central province of Henan set up task forces to address the issue of unfinished housing projects, the Global Times newspaper reported, following widespread concerns over the systemic risks posed by mortgage defaulters.
Authorities in Henan’s Pingdingshan city were finding ways to kick start unfinished projects, while Gongyi city announced on July 14 that three stalled projects in the city had been “properly resolved,” the paper said.
“The accelerated moves by local authorities come as mortgage defaults in some Chinese cities, including those in … Guangdong … Henan and Hunan provinces, have raised concerns at both home and abroad,” the paper said, RFA reported.
“Risk management mechanisms are generally deemed strong enough to withstand the risk,” it said of the banking sector.
Financial markets commentator Chai Xin said the CCP is very worried that the mortgage repayment strike will have a knock-on effect on public confidence in the banking system.
“The suspension of mortgage repayments isn’t going to have a huge impact on the banks’ huge assets,” he said. “But the thing the banks are most worried about right now is wavering public trust,” he said.
“If public confidence in the banks is shaken, then they will have a big problem.”
The move to reassure the public comes after thousands of people protested outside the Shaanxi branch of the China Banking and Insurance Regulatory Commission (CBIRC) in the northern city of Xi’an on July 14, calling for an investigation into bank loans to property developers, some of whom have been transferring funds overseas, RFA reported.
Since the protests began over the withdrawals freeze at the Henan rural banks, customers have also reported that their bank cards have been frozen or restricted by other banks in Beijing, Shandong, Hainan and other provinces and cities.
One newspaper quoted a depositor in Shaanxi as saying that his ICBC savings card wouldn’t let him withdraw or transfer his money, only deposit it.
The Securities Daily quoted several banks as saying that cards are generally restricted because of suspected money-laundering or other illegal activities, amid reports that Chinese banks have stepped up scrutiny of dormant accounts with no activity for three years or more in recent years, RFA reported.
