China Rocked By "Unprecedented" Surge In Bank Runs
At first, it was an unthinkable taboo - after all with a banking system that's twice as large as that of the US, the last thing Beijing wanted (or could afford) was doubts that the people's trillions in savings were safe as the alternative was not just a collapse of the financial sector but a breach of China's capital controls firewall as tens of millions scrambled to move their savings abroad, in the process obliterating the yuan. Then, starting in early 2019 after several banks quietly failed or were not so quietly nationalized…
… most notably the inner-Mongolia-based Baoshang Bank which was seized in the first state takeover since 1998, domestic confidence in China's banking system was suddenly - and perhaps irreparably - shaken, leading to scattered scenes such as these as depositor runs hammered several Chinese banks , forcing Beijing to unleash unprecedented damage control (and internet censorship) to keep the illusion that all is well.
Fast forward to today, when a confluence of the adverse trends that emerged in 2018 and 2019, coupled with the historic economic slowdown in China's economy, and accelerated by social media-fueled rumors about collapsing banks have sparked what Bloomberg called an "unprecedented" surge of bank runs, forcing regulators and even the police to step in to calm depositors.
According to Bloomberg, in just the past few weeks, worried savers have descended on three banks to withdraw funds amid rumors of cash shortages that were later dismissed as false.
Over the weekend customers rushed to a bank in the northern Hebei province to take out money, prompting local regulators to publicly vouch for the soundness of its lenders as the police halted the run.
Indeed, as Bloomberg adds, "after several bailouts and the first bank seizure in more than two decades last year, the coronavirus outbreak and its economic fallout have exacerbated an already shaky situation in the world’s largest banking system" leading to a sharp erosion of confidence in the $43 trillion banking system among the nation’s more than 1 billion account holders, threatening a cornerstone of China’s rise into an economic powerhouse.
"The perception Chinese savers had of banks being risk free is changing even though in nearly all recent cases their deposits have been protected," said China International Capital Corp analyst Zhang Shuaishuai.
"Once a rumor like this spreads, it brings immediate liquidity risk to a bank."
There is probably a reason for why these "rumors" have led to such a dramatic response: they merely bring to the surface whatever most already know, namely that behind its sterling facade, China's banking system is rotten to the core, with lies upon lies about trillions in non-performing loans…
https://www.zerohedge.com/markets/china-rocked-unprecedented-surge-bank-runs