China detains alleged ‘bank fraud gang’ after financial corruption protests turned violent

Members of a ‘criminal gang’ accused of taking control of local banks have been arrested in central China after rare protests over alleged financial corruption sparked violent clashes between customers and authorities.

China’s rural banking sector has been hit hard by Beijing’s efforts to curb the housing bubble and rising debt, in a financial crackdown that has had ripples in the world’s second largest economy.

The delay forced four banks in Henan province to freeze all cash withdrawals since mid-April, leaving thousands of small savers out of cash and sparking sporadic demonstrations.

In one of the largest demonstrations to date, hundreds gathered on Sunday outside a branch of the People’s Bank of China in Henan’s capital Zhengzhou and demanded their money, according to multiple witnesses who declined to be named.

Protesters held banners accusing local officials and police of corruption and called on the central government to “severely punish those responsible,” according to video footage verified by AFP.

Footage from Sunday’s rally showed protesters throwing objects, while a participant told AFP that protesters were hit and injured by unidentified men.

People are holding big banners with Chinese characters outside a sofa
Authorities had previously tried to prevent protesters from mobilizing by using a COVID-19 tracking app.AP: Yang

Another video verified by AFP showed a man with a swollen eye saying he had been beaten by “gangsters” and dragged to a bus by police.

Some protesters accused officials of colluding with local banks to suppress demonstrations, and provincial authorities were suspected last month of abusing the country’s mandatory COVID-19 health code to effectively ban protesters from public spaces.

The pass has become a ubiquitous part of life in China under Beijing’s strict COVID-zero strategy, and is required for access to the vast majority of buildings, shopping malls, public places, as well as some public transportation.

Protests are relatively rare in China, but desperate citizens have occasionally managed to stage mass rallies, usually when their targets are local governments or individual companies.

Deepening crisis

Local authorities did not immediately comment on the unrest, but police in the neighboring town of Xuchang said they had arrested members of an alleged “criminal gang” for their alleged involvement in a plan to take control of local banks.

The gang made illegal transfers through fictitious loans and used their shares — as well as “executive manipulation” — to effectively take over several local banks as of 2011, police said late Sunday.

Authorities in Henan said they will first start repaying the funds of several rural banks that were frozen, in an effort to ease fears among depositors.

A man in a wheelchair stands next to a woman holding a sign
Some protesters were reportedly injured when they were roughly taken away.AP Photos

Payments will be made in batches, with the first on July 15, the local banking and insurance regulator and Henan Province’s financial regulatory agency said in a joint statement.

It previously said it “accelerated” plans to address the local financial crisis and “protect the legal rights and interests of the general public”.

But analysts expect the economic crisis to deepen and the fallout from the collapse of real estate giant Evergrande last year to continue.

The problems “appear to be the tip of the iceberg of serious systemic and financial risk at small and medium-sized banks in China,” a report from risk consultancy SinoInsider said last week.

“Other small and medium-sized banks may soon face similar problems, especially as the financial contagion from Evergrande’s debt crisis deepens and the Chinese economy deteriorates significantly,” it added.

“Why do you treat people like this?”

Protesters in Henan largely drew sympathy on Chinese social media on Monday, with many on the Weibo platform pointing the finger at local officials.

“Why do you treat ordinary people like this?” asked one Weibo user in a post Monday.

Online discourse surrounding the protest, however, remained closely monitored, with Weibo disabling the hashtag for “the incident where Zhengzhou police hit the public,” which some people had used about Sunday’s violent clashes.

Meanwhile, a report alleging protesters had been beaten at the Zhengzhou protest just hours after it was published was removed from the English-language website of state-sponsored outlet Sixth Tone.


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