Chinese police have arrested more than 200 suspects linked to one of the nation’s biggest banking scandals that triggered rare mass protests and dealt a major blow to confidence in the financial system.
Four banks in Henan Province suspended cash withdrawals in April as regulators cracked down on mismanagement, freezing the funds of hundreds of thousands of customers and sparking protests that at times ended in violence.
Police in the city of Xuchang on Monday said they had now arrested 234 people in connection with the scandal and that progress was being made in recovering stolen funds.
They said in a statement that a “gang” had taken control of a number of local banks, attracting depositors with interest rates as high as 18 percent.
Large amounts of funds were then “exploited by financial brokers,” they said.
Authorities previously said the gang had effectively controlled the banks since 2011.
China’s rural banking sector has been hit hard by Beijing’s efforts to rein in a property bubble and spiraling debt, in a financial crackdown that has had ripple effects across the world’s second-largest economy.
The size and scale of the fraud dealt an unprecedented blow to public confidence in China’s financial system, analysts have said, with the banks involved allegedly operating illegally for more than a decade.
Beijing is desperate to avoid disruptions to social stability just months from a major meeting of the Chinese Communist Party, where Chinese President Xi Jinping (習近平) is expected to secure an unprecedented third term in power.
A July 10 mass demonstration by depositors in Henan’s provincial capital Zhengzhou was violently quashed, with demonstrators forced onto buses by police and beaten, according to eyewitness accounts given to Agence France-Presse and verified photos on social media.
Regulators have been gradually offering repayments to depositors since the middle of April.
On Monday, the Henan banking and insurance regulator promised to repay those who had deposited between 400,000 and 500,000 yuan (US$57,860 to US$72,325) starting this week. Depositors who owed smaller amounts had been repaid.
Separately, China’s largest developer, Country Garden Holdings Co (碧桂園), yesterday reported a record 96 percent annual decline in its first-half earnings, in the latest grim illustration of the economic chaos coursing through the country’s property sector.
Its earnings plunged to 612 million yuan as the domestic property market has “slid rapidly into severe depression,” the company said in a report.
It was the company’s biggest recorded fall since its Hong Kong listing in 2007.
The Foshan-based firm reported that revenue tumbled 31 percent to 162 billion yuan amid a “harsh business environment in which only the fittest can survive,” it said.
Core net profit, which reflects adjustments such as re-evaluated properties, came in at 4.9 billion yuan, down 68 percent year-on-year.
Country Garden attributed the lackluster results to the market’s weakening expectations, sluggish demand and a fall in property prices — although it still tried to paint a rosy picture of pending recovery.
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