A Spate of Bank Runs Breaks Out in China, Fueled by Social Media

(ĐTTCO) - 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.

A Spate of Bank Runs Breaks Out in China, Fueled by Social Media

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. They are also asking banks to forgo 1.5 trillion yuan in profit this year by offering lower lending rates, cutting fees, deferring loan repayments, and granting more unsecured loans to small businesses to help the economy.

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.”

Bình luận

Xin vui lòng gõ tiếng Việt có dấu

Các tin khác

Post-Audit Governance: A New Era of Enterprise Accountability

Post-Audit Governance: A New Era of Enterprise Accountability

(SGI) - Vietnam is undergoing a fundamental transformation in how it governs and regulates businesses. A key component of this shift is the move from a “pre-audit” to a “post-audit” regulatory mechanism, as outlined in Resolution 68/NQ-CP, a major policy aimed at fostering private sector development.

Tax Concerns Remain a Major Barrier

Tax Concerns Remain a Major Barrier

(SGI) - Vietnam is home to more than five million business households, which together contribute around 30% of the country’s GDP and support tens of millions of jobs—particularly in the informal economy. With this scale, policymakers see these grassroots entrepreneurs as a critical engine for economic growth.

Vietnam’s Private Sector Finds Its Voice

Vietnam’s Private Sector Finds Its Voice

(SGI) - Vietnam is making one of the most decisive shifts in its modern economic history. With the introduction of Resolution 68-NQ/TW by the Politburo, the country is rewriting not only its approach to private enterprise, but also the very relationship between the state and its citizens in the economic sphere.

Resolution 68 Sparks New Hope for Vietnam’s Private Sector

Resolution 68 Sparks New Hope for Vietnam’s Private Sector

(SGI) - In an interview with Saigon Investment, National Assembly Deputy PHAN ĐỨC HIẾU, Standing Member of the National Assembly’s Economic Committee, discussed the significance of Politburo Resolution No. 68-NQ/TW, issued on May 4, 2025.

Vietnam is a Long-Term Investment Destination

Vietnam is a Long-Term Investment Destination

(SGI) - In this interview with Saigon Investment, Vinnie Lauria, Founding Partner of Golden Gate Ventures and Board Member of the Vietnam Private Capital Association (VPCA), shares why he believes Vietnam is not just a market to watch—but a place to fully commit to for the long haul.

Ho Chi Minh City's 25-Year Vision

Ho Chi Minh City's 25-Year Vision

(SGI) - Reflecting on the 50-year journey of development from Saigon – Chợ Lớn – Gia Định to the present-day Ho Chi Minh City, the city’s transformation stands as a landmark in Vietnam’s modern history. On this significant occasion, Saigon Investment sat down with Dr. Trần Du Lịch, a leading economist, to discuss the city’s strategic role and vision for the future.

The Leading Role of Ho Chi Minh City

The Leading Role of Ho Chi Minh City

(SGI) - Since April 30, 1975, the Politburo has issued four major resolutions regarding the direction and tasks of Ho Chi Minh City's development, including Resolution 01-NQ/TW (1982), Resolution 20-NQ/TW (2002), Resolution 16-NQ/TW (2012), and Resolution 31-NQ/TW (2022).

Vietnam is a Long-Term Investment Destination

Vietnam is a Long-Term Investment Destination

(SGI) - In this interview with Saigon Investment, Vinnie Lauria, Founding Partner of Golden Gate Ventures and Board Member of the Vietnam Private Capital Association (VPCA), shares why he believes Vietnam is not just a market to watch—but a place to fully commit to for the long haul.

Where’s the Money? Unlocking Capital for Vietnam’s Real Estate Market

Where’s the Money? Unlocking Capital for Vietnam’s Real Estate Market

As Vietnam’s real estate market struggles to regain momentum, one key issue remains front and center: capital. While legal reforms are important, experts say unlocking diversified sources of funding—not just relying on bank loans—is essential for a sustainable recovery.
So the question remains: Where is the money?

Nguyen Thi Thai Binh (left), deputy chief of mission at the Vietnamese Embassy in Seoul, receives a souvenir from Choi Jin-young, CEO of Herald Media Group, following her speech at the 2025 Global Business Forum on Wednesday in Seoul. (Herald Media Group)

2025 Global Biz Forum highlights business opportunities in Vietnam

(SGI) - Leaders from across Korea's business and public sectors gathered in Seoul on Wednesday for the ninth session of the 2025 Global Business Forum, exploring investment opportunities in Vietnam, as the country's deputy envoy reaffirmed Hanoi''s commitment to supporting global investors.