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Bank Runs and Concerns about the Financial Standing of China’s Small Banks

On November 6, the Yingkou Coastal Bank in Liaoning Province had a surge of a large number of depositors withdrawing funds. The police department of the Yingkou area, in an attempt to reassure the customers about the bank’s financial standing, issued a statement on the same day. The bank run was caused by concerns about poor management and liquidity problems in small regional banks. The police statement said, “Due to the Internet rumors that the Yingkou Coastal Bank was deeply mired in a financial crisis, a large number of depositors went to the bank to withdraw their funds.” The police took a leader who was suspected of disrupting the public order back to the station for investigation and said that it would severely crack down on actions of “spreading rumors” and “making trouble.”

This is now the second bank run in China recently. After an executive of the Yichuan Rural Commercial Bank in Henan Province was taken away last week for investigation, panic spread among depositors, who rushed to the bank to withdraw cash.

According to a Reuters’ report earlier this year, as China’s economic growth has slowed to its lowest point in nearly 30 years, the government made a rare move by taking over an almost unknown Inner Mongolian Merchant Bank. It also bailed out the Jinzhou Bank in Liaoning province and the Hengfeng Bank in Shandong province. It thus has raised concerns about the financial realities of hundreds of small regional banks in China.

Source: Voice of America, November 6, 2019