https://www.bloomberg.com/news/arti...ce-police-regulators-to-act?srnd=premium-asia A Spate of Bank Runs Breaks Out in China, Fueled by Social Media BC-A-Spate-of-Bank-Runs-Breaks-Out-in-China-Fueled-by-Social-Media , Bloomberg Social media-fueled rumors about banks collapsing are popping up at an unprecedented frequency in China, forcing regulators and even the police to step in to calm depositors. Just since the past month, 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. Confidence in the $43 trillion banking system is eroding among the nation’s more than 1 billion account holders, threatening a cornerstone of China’s rise into an economic powerhouse. 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. “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 Zhang Shuaishuai, a Shanghai-based analyst at China International Capital Corp. “Once a rumor like this spreads, it brings immediate liquidity risk to a bank.” For decades, deposit-taking has provided a stable and low-cost funding base for China’s financial market, playing a key part in the rise of its economy to the second largest in the world. Chinese households hold about 90 trillion yuan ($13 trillion) of bank deposits, more than anywhere else in the world. Regulators are now not only seeking to soothe nerves publicly, but are also raising the protection to preserve this cushion for banks. The run in Hebei came after authorities kicked off a pilot program to limit large transactions in the province. The two-year program, which is set to be expanded to Zhejiang and Shenzhen in October to encompass 70 million people, would require retail clients to pre-report any large withdrawals or deposits of 100,000 yuan ($14,000) to 300,000 yuan. The China Banking and Insurance Regulatory Commission on Saturday again warned that lenders are facing a surge in bad debt as the economy sputters at its slowest pace in four decades. While stopgap measures, which have included rolling over debt and delaying loan payments, have limited an immediate surge in bad debt, the regulator said the fundamental issues of poorly managed banks and the deteriorating ability of companies and individuals to repay loans are still far from solved. Authorities have more than 3,000 banks to oversee, most of which are small, rural entities without ready access to capital. In another unprecedented move, China now plans to allow local governments to use about 200 billion yuan from bond sales to help smaller banks replenish their capital. The industry overall may suffer an 8 trillion yuan increase in bad debt this year, S&P Global has estimated. Small banks are facing a $349 billion shortfall in capital, according to an analysis by UBS Group AG. Putting that figure at only $50 billion, the regulator said the shortfall could mean slower profit growth or even sliding profits at some institutions. Corporate bonds are also suffering, adding further pressure on banks. About 80 billion yuan worth of Chinese bonds defaulted on and offshore so far this year, the most in at least three years, according to data compiled by Bloomberg. Squashing Rumors In the most recent episodes, authorities stepped in last month to halt banks runs at two local lenders in Hebei and Shanxi. On July 11, savers rushed to withdraw money from Hengshui Bank Co., also based in Hebei, before the police put a stop to it. In response, the local offices of the People’s Bank of China and the CBIRC said in a joint statement that Hengshui Bank and its branches are legitimate financial entities where any savings under half a million yuan are protected under China’s deposit insurance regulation. They reassured depositors that their money is safe and urged them not to “blindly” withdraw savings. Police took people into custody, issuing reprimands to those spreading rumors, according to the statement. Hengshui Bank didn’t immediately respond to calls and emails seeking a comment. More broadly, regulators have been working on a plan since last year that would see more small banks merge to shore up their strength, but so far little of that effort has come to fruition. Investors were spooked last year when authorities seized inner-Mongolia-based Baoshang Bank Co., in the first state takeover since 1998. They have since engineered rescues by having state-run entities inject capital into other struggling lenders such as Bank of Jinzhou Co. “China has too many banks,” said Zhang. “Quite a few of them are weak in corporate governance and earnings capacity. A better option is to take a more proactive approach to restructuring those regional banks.”
China takes over companies linked to disappeared billionaire Hong Kong: Chinese regulators will assume control of nine financial firms linked to a billionaire financier who was taken from a hotel in Hong Kong by Chinese authorities in 2017 and hasn't been seen in public since. Xiao Jianhua, a Chinese-born Canadian financier and a student leader at the time of 1989 pro-democracy protests, has been missing since early 2017 when he was taken from his room at the Four Seasons in Hong Kong. Xiao Jianhua, a Chinese-born Canadian billionaire, reads a book outside the International Finance Centre in Hong Kong.Credit:AP At the time there were fears he may have been abducted by Chinese agents. His disappearance and that of several booksellers provoked outrage that Beijing was flouting Hong Kong's constitution. A full front-page advertisement published under Xiao's name in Hong Kong's Ming Pao newspaper shortly after said he was seeking medical treatment "outside the country" and had not been abducted. Among the companies being taken over include Huaxia Life, Tianan Life Insurance, Tianan Property Insurance, New Times Trust, Yi'An Property Insurance, and New China Trust, the China Banking and Insurance Regulatory Commission said in a statement on its website. Chinese-born Canadian citizen Xiao Jianhua was reportedly abducted by Chinese police from the Hong Kong Four Seasons Hotel and spirited across the border. Credit:South China Morning Post All nine are linked to Tomorrow Group, the investment conglomerate owned by Xiao. The firms are among more than 40 financial institutions identified by New Fortune Magazine in a 2017 article as being part of Xiao's network. The three broking and futures entities were seized for hiding the identity of their ultimate owner or their real holdings, as well as poor corporate governance, the securities regulator said. Tomorrow Group invested primarily in financial services and used shell companies to control many of its assets. Before his disappearance, the Hurun Report of China's richest people said Xiao, was part of a fortune estimated at almost $US6 billion ($8.6 billion). The takeover won't change the firms' debt obligations or creditor rights, and business operations will continue as normal. Also going into state custody will be Guosheng Securities, New Times Securities and Guosheng Futures, the securities regulator said in a separate statement. Chinese authorities are stepping up their bid to maintain financial stability as COVID-19 proves ruinous for economic growth and soured loans pile up. Beijing seized control of Baoshang Bank —another company linked to Xiao — in May last year citing its "serious" credit risks. Last month, regulators were said to be mulling increased oversight of Huaxia Life, including sending a group of executives from state-owned China Life Insurance Group to assist. Insurers' earnings have been under pressure, and the coronavirus pandemic has only exacerbated that. "This is certainly a move in the right direction" in terms of containing financial risk and warning peers of wrongdoing, said Steven Lam, an analyst with Bloomberg Intelligence. "The authorities are also being more transparent by telling the market 'We know there are bad apples, and we're taking care of them'." The CBIRC said in its statement that authorities would seek market-oriented restructurings for the six insurance and trust firms and the bottom line is to avoid any systematic financial risks. In 2018, China's central bank identified Tomorrow as one of several "financial holding companies" that need to be scrutinised in their ownership structure, related transactions and source of funding. "Some financial holding companies, mainly those formed by investments of non-financial enterprises, have been expanding blindly into the financial industry," the People's Bank of China said at the time. "There has been a regulatory vacuum, and risks are accumulating and being exposed continuously." Bloomberg, with Reuters https://www.smh.com.au/world/asia/c...-disappeared-billionaire-20200718-p55d8t.html