Several reports say that the major Chinese real estate developer Evergrande’s downfall triggered a bank run in northern China last week. The bank run began after rumors spread that the financial institution, Bank of Cangzhou, allegedly loaned billions to the struggling company. This development came on the heels of an Evergrande announcement about the detention of its founder, Xu Jiayin.
Evergrande’s Crisis Spills Over, Sparks Bank Run in China’s Cangzhou Prefecture
Evergrande, the Chinese real estate giant, filed for Chapter 15 bankruptcy protection in a New York court on Aug. 18, 2023. The company expanded quickly during China’s real estate boom and was once among China’s top real estate developers.
However, its aggressive growth was financed by significant debt, and by 2021, it amassed more than $300 billion in debt and liabilities. Before its fall, concerns about significant financial fallout resonated both in China and globally.
The implosion of Evergrande isn’t just a blip; its magnitude resonates deeply within China’s economic fabric. Furthermore, its tentacles of debt extend to banks in nations like Australia, the U.S., Canada, the U.K., and beyond.
Notably, both CNN and Asia Times chronicled a surprising bank run at the Bank of Cangzhou, sparked by contagion rumors. Such panic withdrawals are seldom seen in China. The financial institution, with its multiple branches, is situated in a prefecture approximately 100 miles from Beijing.
The bank run news recently went viral on social media as people shared pictures and videos of the event on platforms like X (formerly Twitter). The state run media outlet Yicai reported that police in Cangzhou detained a number of individuals for spreading rumors and a police guard is stationed at the bank’s entrances.
The Bank of Cangzhou further assured the public of the safety of their deposits. To underscore its solvency, reports indicate that hefty stacks of yuan were prominently displayed in the bank’s lobby. The People’s Bank of China (PBOC) swiftly provided emergency financial support to the bank, sources say.
China last witnessed bank runs in April 2022, as four rural banks in Henan province suspended withdrawals, impacting $1.5 billion in deposits. New Oriental Country Bank of Kaifeng, Shangcai Huimin County Bank, Yuzhou Xin Min Sheng Village Bank, and Zhecheng Huanghuai Community Bank initially cited “maintenance” as the cause.
However, locals soon discovered these institutions were under a financial probe. In a parallel development, just before last week’s bank run, reports emerged of the arrest and ongoing investigation of Evergrande’s founder, Xu Jiayin.
What do you think about the Evergrande collapse causing a bank run in northern China? Share your thoughts and opinions about this subject in the comments section below.
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