China shadow bank crisis sparks protest by angry investors
A GROUP of investors protested at the Beijing office of Zhongrong International Trust after the Chinese shadow banking giant missed payments on dozens of products.
Videos of the incident appear to show around two dozen protesters at Zhongrong, at least one representative of the company, and around 10 police and security officers. It’s the latest sign of turmoil at the trust company, whose liquidity crisis has fuelled alarm within financial markets and among Chinese regulators.
In one of the clips seen by Bloomberg News, a woman angrily asks about a product she owned that matured on July 28. “Why doesn’t the company pay us back?” she says. “It has already matured. Your financial statements said there is a profit.”
Another woman shouts: “Give us the money back, or we will die here.” A third says: “Why you don’t give us a clear explanation?”
A man with a loudspeaker who apparently represents Zhongrong says: “We don’t think this is a regulation-violating project or a regulation-violating product.” The exact timing of the protest couldn’t immediately be determined.
A reporter who visited the Zhongrong office on Wednesday (Aug 16) afternoon didn’t see any protesters, but there was an unusually heavy police presence around the building. Officers were seen sitting in several police vans and cars parked inside and outside the office compound, and other police vehicles were placed on roads nearby.
Officers were also watching the area from inside one of the several city buses that were parked at the main gate or nearby. Workers were erecting extra fencing around the building.
Two people standing outside the building said it wasn’t convenient to talk about the situation.
Police in Beijing didn’t immediately respond to a request for comment.
Zhongrong has missed payments on dozens of products and has no immediate plan to make clients whole, Bloomberg reported earlier on Wednesday. At least 30 products are now overdue, and Zhongrong also halted redemptions on some short-term instruments, a person familiar with the matter said.
Chinese authorities have already set up a task force to study any possible contagion, with the banking regulator examining risks at Zhongzhi Enterprise Group, the part owner of Zhongrong, people familiar with the matter said earlier. Zhongzhi manages about US$138 billion.
Protests over financial disputes are fairly common in China but the authorities are unlikely to tolerate them for long, especially in the capital where authorities prize stability.
Police quickly broke up demonstrations in Beijing and other cities late last year over the government’s harsh Covid Zero rules. Officers maintained a presence for days at the site of the unrest to deter any repeat.
Shortly afterward, China started dismantling Covid Zero yet still arrested several people on a catch-all charge called “picking quarrels and provoking trouble.” A conviction on that charge can mean up to five years in prison. It is unclear how their cases were resolved.
A series of demonstrations also erupted in 2022 in the central province of Henan over a suspected financial scam. Police and protesters clashed as hundreds of people demanded the return of deposits worth up to tens of billions of yuan. BLOOMBERG
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