There was a Bank run in China just now2 June, 2012, 0:25. Posted by Zarathustra
Here, we have been saying about debt deflation in China, where people are not borrowing, but selling assets to pay down debts, and/or holding cash. In the situation as serious as in the Great Depression or in the recent Euro crisis, we could see bank run, like the rather slow motion one in Greece.
Bizarrely, one of the bank runs which has recently happened took place not in Europe, but, yes, in China (!). 21st Century Business Herald is reporting that a bank run in banks in the City of Wuyishan. Queues were seen on various branches of China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China.
The reason which triggered the bank run was that there was a company that has just gone bust, with the founder and other executives ran away, brining probably RMB1 billion or more away with them. The company in question looks like a Ponzi scheme. It has set up an online shopping site which, on top of selling stuff, asks people to sign up and pay a certain among of money (e.g. RMB1,600), then the company will pay people back at a rate of RMB20 a day (a fee of 5% out of this RMB20 is deducted). It sounds like a pretty good deal for the members, as far as it is working. Based on the bank statement of the members obtained by 21st Century Business Herald, the company did pay back quite a fair amount, but, of course, the company has sucked up more than it has ever had a chance to pay back.
As the company went bust and the boss disappeared, the members of the website who have paid quite a lot of money in hope to be paid back even more became rather angry, and went to the office of this company in Fuzhou (which is actually not at all near Wuyishan) to protest and smash things. However, as a lot of members of the website came from Wuyishan, people are worried. On late 30 May, there was apparently some chatter that the government is dealing with the case, and will need to freeze personal bank accounts (presumably for investigations). As a result of this, people started queuing up at virtually all banks the next day. One local resident told the reporter that the city “has gone crazy”.
Now the boss is arrested, charged with taking deposits from the public illegally. But victims of the scheme are still counting, and the exact count of the victims of the scheme is not known. What is known is that because the website was so popular all over, the victims of this scheme will not be limited to one city of Wuyishan.