Explained: Protests In China Over Frozen Bank Accounts

A financial scandal brewing in central China has touched depositors across the country. Many people placed their life savings in four rural banks offering high rates of return. When investigators began examining allegations of widespread fraud, the depositors discovered that their funds have been frozen.

In the city of Zhengzhou, Henan's capital, bank customers began showing up to demand their money. The authorities used health code apps meant to prevent the spread of Covid-19 to prevent them from traveling.

The protesters began gathering in front of the Zhengzhou branch of the nation’s central bank, the People’s Bank of China.

They were shouting "Henan Bank, give me back my money!" Some were calling on local ruling Chinese Communist Party (CCP) financial regulator Qin Hanfeng to come out and talk to them.

The authorities sent in guards to beat the depositors. Many depositors were taken to hospital after being beaten by the guards.

A video footage shows gangs of men in white T-shirts crowding around people to beat them up methodically. Hundreds of protesters were detained and put on board dozens of buses.

The rural banks in China began in 2006 as part of the country's rural revitalisation plan, offering high interest on deposits.

A significant proportion of rural savers, attracted by the high interest rates on deposits, placed their entire life savings in these high-interest deposit products.

According to the Ming Pao newspaper, by the end of 2021, there were 1,651 village and town banks in China, accounting for one-third of banking and institutions.

Anyone wishing to set up a village bank requires only 1 million yuan (US $149,300) in registered capital, compared with 1 billion yuan (US $149.3 million) for private banks nationwide.

The China Banking and Insurance Regulatory Commission has warned people that any financial product promising a return of more than 6 per cent is "risky", while anything offering a return of 8 per cent or more is "extremely risky."

"Photos and video of plainclothes security agents attacking the protesters were shared widely on Chinese social media, stirring anger over the use of force. While protest images are often quickly censored in China, the footage from Zhengzhou was still widely available on Monday, with one hashtag viewed 32 million times on Weibo," as per the New York Times.

The hashtag "ThousandsofDepositersBeseigedatChinaCentralBankinZhengzhou" gained more than 12 million views on Weibo, according to a report by the BBC.

The hashtag was later censored and replaced by the message: "According to relevant regulations and laws the topic [will] not be shown."

The Times' report quotes Feng Tianyu, who lives in the northern city of Harbin: “We came all the way to Zhengzhou to get our money back, and we didn’t want to have conflicts with anyone, but the government sent so many people to deal with the unarmed people. We were cheated financially, beaten physically and traumatized mentally,” she says.

Feng is two months pregnant. She was pulled by hair and shoved into a bus. She later visited a hospital for stomach pains but was refused admission.

The banks at the centre of this development are the New Oriental Country Bank of Kaifeng, Zhecheng Huanghuai Community Bank, Shangcai Huimin County Bank and Yuzhou Xin Min Sheng Village Bank. The money of depositors has been blocked since April. The depositors fear that they are now at the risk of being destitute.

“I’m pregnant and have come this far because this money is really important to me, if I don’t get the money back, I can’t have prenatal checks, I can’t have this child, and I can’t continue to support my 2-year-old daughter," says Feng.

She had deposited around $165,000, which was all of her savings plus her father’s pension money.

It is now being reported that Shangcai Huimin Rural Bank, Zhecheng Huanghuai Rural Bank, and Kaifeng New Oriental Rural Bank will issue payments to customers with combined account amounts of less than 50,000 yuan (US $7,500), while those with more than that amount will be paid later.

The financial crisis draws attention to the increasingly vulnerable financial situation in underdeveloped regions. It also shines a light on the violent suppression of peaceful protesters.