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What A Bank Run In China Looks Like: Hundreds Rush To Banks Following Solvency Rumors

Tyler Durden's picture




 

Curious what the real, and not pre-spun for public consumption, sentiment on the ground is in a China (where the housing bubble has already popped and the severe contraction in credit is forcing the ultra wealthy to luxury real estate in places like Hong Kong) from the perspective of the common man? The photo below, which shows hundreds of people rushing today to withdraw money from branches of two small Chinese banks after rumors spread about solvency at one of them, are sufficiently informative about just how jittery ordinary Chinese have become in recent days, and reflect the growing anxiety among investors as regulators signal greater tolerance for credit defaults.

Reuters explains:

Domestic media reported, and a local official confirmed, that ordinary depositors swarmed a branch of Jiangsu Sheyang Rural Commercial Bank in Yancheng in economically troubled Jiangsu province on Monday. The semi-official China News Service quoted the bank's chairman, Zang Zhengzhi, as saying it would ensure payments to all the depositors. The report did not say how the rumour originated.

 

Chen Dequn, a resident in Yandong, just outside Yancheng, said she saw a crowd of about 70 to 80 people gathering in a branch of Sheyang Rural Commercial Bank in her town on Tuesday.

 

"At the moment there are about 70 or 80 people in there. Normally there'd only be about 10," she told Reuters by telephone.

 

Officials at another small bank, Rural Commercial Bank of Huanghai, said they had faced similar rushes by depositors, triggered by rumours of insolvency at Sheyang. "We will be holding an emergency meeting tonight," an official at the bank's administration office told Reuters, but declined to comment further.

 

Why Yancheng investors suddenly lost confidence in the security of their bank deposits is not clear, given that the Sheyang bank is subject to formal reserve requirements, loan-to-deposit ratios and other rules to ensure it keeps sufficient cash on hand to meet demand.

Why the jitteriness? Because until now, bank failures in China have been unknown, as Chinese banks are considered to operate under an implicit guarantee from the government. That is changing. Which is why the rumor mill is on overdrive:

"It's true that these rumours exist, but actually (the bank going bankrupt) is impossible. It's a completely different situation from the problem with the cooperatives," said Zhang Chaoyang, an official at the propaganda department of the Communist Party committee in Tinghu district, where the bank branch is located.

And Bear Stearns is fine...

Zhang was referring to an incident that rattled depositors in Yancheng in January, when some rural cooperatives -- which are not subject to the supervision of the bank regulator -- ran out of cash and locked their doors. Local officials say several co-op bosses fled after committing fraud.

 

China's central bank governor said this month that deposit rates are likely to liberalised in one to two years - the most explicit timeframe to date for what would be the final step in freeing up banks to set their own interest rates.

 

It is widely expected to introduce a deposit insurance scheme before freeing up deposit rates, to protect savers in case a liberalised market puts major strains on smaller banks and alarms the public. Analysts also expect the controls on deposit rates to be lifted gradually. Is China's debt nightmare a province called Jiangsu?

Why are bank runs like these only set to accelerate? Simple - unlike the US China has zero deposit insurance. Reuters expplains:

The case highlights the urgency of plans to put in place a deposit insurance system to protect investors against bank insolvency, as Chinese grow increasingly nervous about the impact of slowing economic growth on financial institutions.

 

Regulators have said they will roll out deposit insurance as soon as possible, without giving a firm deadline.

In the meantime, there are always helpful investor relations people willing to explain calmly just what is going on:

When contacted by Reuters by phone on Tuesday, an official at the Jiangsu Sheyang Rural Commercial Bank branch hung up, saying she was busy.

Others were even more helpful:

An official at the administrative office at Jiangsu Sheyang Rural Commercial Bank said the bank would publish a statement shortly. On its website, the bank says it is capitalised at 525 million yuan and had total deposits of 12 billion yuan as of end-February,

 

Officials at the Jiangsu branch offices of the China Banking Regulatory Commission (CBRC) declined to comment. The Yancheng branch of CBRC and the propaganda offices in Yancheng city and Sheyang county did not answer calls seeking comment.

Busy or not, for now, the banks may have survived following yet more capital infusions from the local government, but what happens when the default wave that has claimed solar, coal, and real estate developers finally impacts a deposit-holding institution? How will China - which has far more total deposits within its banking system than in the US (since the US banks fund themselves mostly using ultra-short term, overnight shadow funding) - survive a nationwide bank run we wonder?

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Tue, 03/25/2014 - 09:55 | 4589729 kliguy38
kliguy38's picture

give them the T bonds...heck....ya gotz 2 Trillion of um

Tue, 03/25/2014 - 09:59 | 4589744 holmes
holmes's picture

sum ting wong.

wear my mone?

Tue, 03/25/2014 - 10:05 | 4589769 cifo
cifo's picture

smog

Tue, 03/25/2014 - 10:09 | 4589790 DoChenRollingBearing
DoChenRollingBearing's picture

And now it has come to China.  Next to a country near you soon?

"GOTS"

Tue, 03/25/2014 - 10:11 | 4589800 Cap Matifou
Cap Matifou's picture

Soon to be seen in real life, wherever you happen to live.

Tue, 03/25/2014 - 10:22 | 4589858 SMG
SMG's picture

I feel like a giant rock has been hanging over the economy for 7 years now.  It never drops.  I know it will one day it will drop, but it just keeps hanging there, rumbling and looking unstable.

Tue, 03/25/2014 - 10:29 | 4589898 bigkahuna
bigkahuna's picture

It seems by design.

Tue, 03/25/2014 - 10:33 | 4589912 lordylord
lordylord's picture

It's falling apart boys.  When it does, they will try to impose MORE GOVERNMENT and MORE CONTROL.  It will be sold to the public under the guise of safety and stability.  Don't let your friends, family, and neighbors fall for it.  

Tue, 03/25/2014 - 10:51 | 4589955 CheapBastard
CheapBastard's picture

"If you don't hold it, you don't own it."

 

-Konfucious say

Tue, 03/25/2014 - 11:12 | 4590037 pods
pods's picture

On the bright side, you can at least see 100 yards now over there.

Maybe they create all the smog to hide the pigs floating down the river?

pods

Tue, 03/25/2014 - 11:23 | 4590104 HoofHearted
HoofHearted's picture

They are gonna need a whole lotta George Baileys to hold together all the banks...

Tue, 03/25/2014 - 11:34 | 4590159 Rubicon
Rubicon's picture

"I mean - what have you got to lose?

You know, you come from nothing

- you're going back to nothing.

What have you lost? Nothing."

Tue, 03/25/2014 - 11:53 | 4590273 toys for tits
toys for tits's picture

The thing about a bank run in China is that thirty minutes later you'll want to run it again.

Tue, 03/25/2014 - 12:41 | 4590469 JoeSexPack
JoeSexPack's picture

Thanks Rubicon,

 

Material things can be nice, but are only material things.

Tue, 03/25/2014 - 13:05 | 4590592 SoilMyselfRotten
SoilMyselfRotten's picture

We have those long lines too(in our soup kitchens)

Tue, 03/25/2014 - 19:18 | 4592157 Herd Redirectio...
Herd Redirection Committee's picture

Here's a good one.

Banker's son accidentally kills self by hanging:

http://www.dailymail.co.uk/news/article-2588988/Bankers-son-accidentally...

Tue, 03/25/2014 - 21:41 | 4592550 The Vineyard
The Vineyard's picture

Too bad.  Mr. Chin can no longer afford a happy ending.  Bitches.

Tue, 03/25/2014 - 21:50 | 4592576 UselessEater
UselessEater's picture

this seems more like a bloody aweful accident

Jim Willies recent comments on his website about the mid-level bankers who know where the bones are buried (assume this includes some IT people) being cleaned up however makes some sense.

Tue, 03/25/2014 - 16:05 | 4591490 MsCreant
MsCreant's picture

I LOL.

Chinese bank runs = output crisis = bank diarrhea.  Caused by excessive printing. Some things are just always going to mess up your system if you take in too much of it.

Tue, 03/25/2014 - 18:19 | 4591953 MillionDollarBoner_
MillionDollarBoner_'s picture

Always look on the bright side of life :O) 

Tue, 03/25/2014 - 20:28 | 4592351 Antifaschistische
Antifaschistische's picture

The thing we all should fear about the Chinese is that more than any other civilization on earth, when someone says "get in line" the Chinese will get in line, and get it done.  It doesn't matter if it's building a dam, or a pipeline, or a railroad, etc.  

The thing their own government should fear the most, is that...they will form those lines for many other things.  From respirator sales, to bank runs.   The Chinese move in herds.  It is the ultimate international example of bandwagonning.   Interesting to watch.

Tue, 03/25/2014 - 10:52 | 4589960 Independent
Independent's picture

Once dollar loses reserve currency status and all the greenbacks come flooding back in expect to see people line up to empty their accounts just so they can buy bread.  Coming soon here also.

Tue, 03/25/2014 - 11:19 | 4590085 Chupacabra-322
Chupacabra-322's picture

Yup. How's that QE working out now. All done design, all done by agenda.

Tue, 03/25/2014 - 11:33 | 4590151 Independent
Independent's picture

The other possibility is that as we all know China is a tad bit overcrowded at 1.5 billion people, could that just be a normal bank day?

Tue, 03/25/2014 - 11:35 | 4590160 lordylord
lordylord's picture

When government herds you into cities, they do tend to get crowded...and full of smog.

Tue, 03/25/2014 - 18:20 | 4591935 Lore
Lore's picture

If you want to know what an American city will look like under Agenda 21 "Redevelopment" precepts, look to China: millions 'n millions of shitty little stand-and-pack apartments with shitty little storefronts at street level.

Tue, 03/25/2014 - 18:29 | 4591993 cynicalskeptic
cynicalskeptic's picture

What about all those brand new empty malls and apartment buildings?

Not seeing any of those here in the US.... plenty of old crappy empty strip malls and lots of empty cheaply built houses way out in exurbia

Tue, 03/25/2014 - 21:27 | 4592516 Lore
Lore's picture

Fair point. I have seen a couple of the so-called "ghost cities."  They're primarily a manifestation of bad policy, like many American embarrassments. That said, I'm inclined to reserve judgement about their utility in the context of a unique Chinese problem of how to modernize a massive population of what might be called 'peasants,' similar in some respects to uncivilized folk depicted in episodes of the old TV series The Waltons.  For many years, young rural Chinese have been migrating to cities in search of more interesting jobs and sophisticated living, leaving their parents to look after traditional crops and farmland. As the Chinese economy starts to slow down from its frenetic pace, as food becomes more expensive, and with the passing of the old generation, those "ghost cities" might be key to bringing workers back to the rural areas without giving up some of the modern infrastructure and amenities.  In some of the wealthiest settlements, homebuilders are even exploiting interest in traditional American post-colonial style house designs, complete with white picket fences. Rgds

China's Western-Style Developments Borrow McMansion Style

Tue, 03/25/2014 - 11:13 | 4590043 Ariadne
Ariadne's picture

Ordo ab chao

Tue, 03/25/2014 - 11:50 | 4590254 TheMeatTrapper
TheMeatTrapper's picture

"Don't let your friends, family, and neighbors fall for it."

 

Too late. They not only fell for it - they demanded it!

Tue, 03/25/2014 - 14:48 | 4591155 shovelhead
shovelhead's picture

I ordered mine Extra-crispy.

Tue, 03/25/2014 - 11:50 | 4590255 lynnybee
lynnybee's picture

Don't let your friends, family, and neighbors fall for it.  ... friends&family?   they laugh at me, i'm an outcast.   i've been crying wolf since 2010 & nothing has happened yet, & that silver i urged them all to buy ?  well, that has lost half in dollar terms.   my so-called friends and family kick dirt in my face & laugh at me, after all, what does a crazy old woman know? 

Tue, 03/25/2014 - 12:17 | 4590388 hapless
hapless's picture

Fuck'em.  They were just looking for an excuse to call you crazy anyway.  And when they finally realize that you had been right all along, they will just call you lucky AND crazy.

Tue, 03/25/2014 - 17:50 | 4591886 Chupacabra-322
Chupacabra-322's picture

Other well known "Carzy" people or extremist.

Ghandi
Martin Luther King
JFK
John Lennon
Ron Paul
Jesse Ventura
Gerald Celente
Etc....

Tue, 03/25/2014 - 21:58 | 4592601 UselessEater
UselessEater's picture

lynnybee.... we KNOW!!! So you're a normal crazy among crazies on ZH.

Keep trying, it took my brother a couple of years to get me and his folks to consider his views, then within no time we all were on the same page.

Tue, 03/25/2014 - 12:36 | 4590453 General Decline
General Decline's picture

A voice crying in the wilderness.  me too

Tue, 03/25/2014 - 13:36 | 4590774 DoChenRollingBearing
DoChenRollingBearing's picture

Me three.  I gave up years ago.

Tue, 03/25/2014 - 18:39 | 4591973 Lore
Lore's picture

When your opinion is asked about something specific, answer simply and briefly and give the listener time to chew on ramifications. Be patient and let one question lead to another. An intelligent listener with an inquiring mind will follow up with related questions; keep answering the same way. Freeing minds is a process that works one question at a time. Don't be a preacher:  it overwhelms those who are unready and hurts your relationships. It's better to keep conversation mundane and get along than to risk losing future opportunities. "When the student is ready, the tutor will appear."

Tue, 03/25/2014 - 23:32 | 4592791 TheReplacement
TheReplacement's picture

Where do you find these people of whom you speak?

Tue, 03/25/2014 - 23:46 | 4592808 willwork4food
willwork4food's picture

Well said Lore. I just watched Hunger Games 2 for the second time. Feel like taking a few tree hanging ropes to DC, sure brings out the revolutionary spirit especially with all the f*king cute girls in the story. But you got to ask yourself WHY would the Zionist occupied movie industry in California allow such a film?

Wed, 03/26/2014 - 00:09 | 4592843 Terminus C
Terminus C's picture

To keep revolution as a fantasy in our minds.

Wed, 03/26/2014 - 00:18 | 4592856 willwork4food
willwork4food's picture

I suggest they want a civil war. Note I said civil war, not revolution because that's what it would be with the mindset of the American public concentrated on Blue/Red issues. Civil war starts, they have to bring out the troops to maintain peace, dollar collapse, blame it on each other. Famine, death, starvation. We would all welcome a new world order. Beautifully orchestrated; thesis, anti-thesis, synthesis.

They're evil, but not dumb.

Wed, 03/26/2014 - 06:34 | 4593089 Ar-Pharazôn
Ar-Pharazôn's picture

i would say that their intent is to make us revolt and install an even worse governement after the revolution ;)

Tue, 03/25/2014 - 13:31 | 4590748 RichardParker
RichardParker's picture

Maybe you are a modern day Cassandra? I dunno...

http://en.m.wikipedia.org/wiki/Cassandra

 

Tue, 03/25/2014 - 18:27 | 4591980 casfoto
casfoto's picture

Buy all they're silver up....at a big discount....laugh at them for being fools....tell them next time to buy gold and you will do it again. Throw dirt at them

Tue, 03/25/2014 - 18:27 | 4591981 casfoto
casfoto's picture

Buy all they're silver up....at a big discount....laugh at them for being fools....tell them next time to buy gold and you will do it again. Throw dirt at them

Tue, 03/25/2014 - 22:58 | 4592730 Quus Ant
Quus Ant's picture

They are your family and friends.  Love them.  Who knows how this is all going to play out- all anyone has are theories.  Some more, some less plausible. 

TPTB have been playing these games forever and average everyday folks have been waiting for the ponzi to fall apart just as long.

Have a sense of humour about yourself or you'll go insane before the end.

Wed, 03/26/2014 - 01:48 | 4592951 Drifter
Drifter's picture

Why bring their disdain on yourself? 

I don't tell anybody anything, there's no hope for sheep, try saving them, they drag you under with them, fuck 'em, let 'em sink.

Tue, 03/25/2014 - 18:17 | 4591946 Rafferty
Rafferty's picture

Exactly.   Just as 9/11 was used for more control and less freedom.

Tue, 03/25/2014 - 22:53 | 4592701 wee-weed up
wee-weed up's picture

 

 

lordylord  said:

"It's falling apart boys.  When it does, they will try to impose MORE GOVERNMENT and MORE CONTROL.  It will be sold to the public under the guise of safety and stability."

-------------------------------------------

Not just safety and stability... but also "National Security" - the ultimate catch-all now for anything unpleasant the GOV'T wishes to do to us serfs!

Thank you, George Bush! And Thank you Obozo, for putting it on steroids! May you both rot in hell!

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