Chinese Bank Runs Pile Up

Signs of concerns continue to build up in China’s financial system with another two lenders affected by recent bank runs.

The Local governments and police of Baoding city in Hebei province and Yangquan city in Shanxi province pleaded customers not to withdraw cash from local lenders Baoding Bank and Yangquan Commercial Bank, respectively.

Last week, the Baoding city government reassured on its social media account that Baoding Bank was operating normally while urging the public against believing or spreading rumors. The police followed up with a statement claiming it had arrested two individuals for spreading rumors that led to «panic among the public».

Yangquan’s government also issued a similar statement, adding that customers should be watchful of risks of holding a lot of cash.

There are growing concerns from China’s public about the health of the domestic financial system evidenced by increasing bank runs. In April this year, the Bank of Gansu was hit by a bank run which led to regulator intervention. During a two-week period In November last year, depositors from Liaoning-based Yingkou Coastal Bank and Henan-based Yichuan Rural Commercial Bank swarmed to withdraw cash.

Bank runs aside, China has also had to increasingly restructure banks including last year’s historic trio of bailouts which included Baoshang Bank, Bank of Jinzhou and Hengfeng Bank.

At the end of 2019, Baoding Bank’s non-performing loan ratio was 2.12 percent, up from 2.09 percent in 2018. Yangquan Bank has not published data for 2019, but its ratio had more than doubled to 2.57 percent in 2018 from 1.03 percent in 2017.