Chinese Banks Forced to “Show Them The Money”

Rural banks in China’s eastern city of Yancheng stacked piles of cash in plain view behind teller windows to calm depositors queuing at bank branches for a third straight day on Wednesday following rumors that they had run out of cash.

According to residents of Sheyang county, which includes Yancheng, panic began on Monday with a rumor that a branch of one local bank turned down a customer’s request for a 200,000 yuan withdrawal. Banks declined to comment and Reuters was unable to verify the rumor.

The affected institutions are tiny compared with the scale of China’s financial sector, and the rush for cash appears to be an isolated incident so far. Rumors also found especially fertile ground there after a failure of less-regulated three rural credit co-operatives last January.

Yet the news caught nationwide attention, reflecting growing public anxiety as regulators signal greater tolerance for credit defaults.

Miao Dongmei, who runs a baby supply store opposite the branch of the Jiangsu Sheyang Rural Commercial Bank first targeted by depositors said she kept money at the bank, but did not join the stampede.

However, she said she had seen other customers carrying baskets full of cash out of the bank branch, while armored cars kept pulling up to deliver fresh loads of currency.

Sheyang bank employees told Reuters that some branches had been open 24 hours over the past two days.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza