Chinese Bank Runs: Why You NEED To Pay Attention To This!!

In these times of economic uncertainty It’s not the news stories that are being Covered that need to be focused on but Those that aren’t And when some stories are suppressed by The powers that be you know they’ve got To be big Right now there are things going on that Could be the proverbial canaries in the Economic coal mine and one of these Canaries is chinese bank runs In this video i’m going to tell you Exactly why you need to be keeping a Very close eye on this little birdie [Music] Now if this is the first time that You’re hearing about chinese bank runs Then that’s probably by design China is not a country that’s well known For its transparency and protests of any Kind are routinely suppressed This year has seen some particularly Brutal suppression given that it’s the Year of the 20th party congress and xi Jinping wants no disruptions to a smooth Transition into his unprecedented third Term but over the past three months There have been several bank runs taking Place across china Bank runs on smaller rural banks where An estimated 1.5 billion dollars worth Of deposits have been lost But before diving into the runs Themselves it’s important to have a

Brief understanding of china’s banking Landscape It helps to understand exactly how we Got here and why it’s such a precarious Situation Basically in china there are thousands Of small rural banks that are meant to Serve only the local population if we Include the slightly larger commercial Rural banks the total number of banks That fall into this category numbers Over 3 800. They hold assets to the equivalent of About 300 billion dollars around 12 Percent of total banking assets in china Structurally you can think of these Banks as akin to credit unions in the United states however there are supposed To be strict limits on who is allowed to Open accounts at these banks In china such banks are not allowed to Expand outside of their locality The role that these banks are supposed To play is simple to support the local Economy of small farmers and small to Medium-sized enterprises The problem is that these banks were Obviously highly dependent on the local Economy Moreover as increasing numbers of people Migrate away from rural areas to the Cities the customer base of these banks Starts to shrink And if there is one thing that china has

Been known for over the past 10 years it Is rapid urbanization Millions of people have indeed moved to The cities The natural result of this was a loss of Customers for these banks and because They could not expand out their Localities they needed to find a way to Bring in more customers As such they started to turn their Attention to attracting more customers Through online platforms sometimes those Who lived beyond The bank’s catchment areas While this was technically illegal the Rules were not being enforced And in order to entice these customers To bring their funds to the banks they Advertised higher interest rates with Flexible terms What could go wrong This led many out-of-towners to invest Their money in these banks through these Online lending platforms They didn’t expect this to be a risky Investment that’s because unlike prior P2p loan scandals in china these were Banks People always trusted that their money Would be available to them thanks to Government deposit insurance schemes Anyways as the people’s bank of china Pboc continued with its lacks monetary Policy interest rates in the economy

Continued to decline for example bank of China one of china’s big four State-owned banks offered interest rates Of 2.75 percent on a five-year fixed Deposit So when you have a rural bank that’s Offering you rates of between 4.1 and 4.5 percent it’s particularly alluring This meant more and more people Continued to deposit their funds into These banks through their online Platforms Now the only problem is that in order to Keep generating those returns the banks Have to start taking on progressively More risk and stop me if you’ve heard This one before As a bank this means that you have to Start giving out loans to companies and People who are less than creditworthy And in china there were a lot of these Companies and they were taking out a Shitload of loans particularly in the Property sector something i’ll come back To in a bit So this was the lay of the land in the Chinese rural banking sector however Things took a turn for the worse in April this year At about the same time that china was Going into broad and brutal lockdowns People who had invested at these rural Banks began to learn that they didn’t Have access to their funds

On the 18th of april four rural banks in Hanan province froze deposits totaling About 10 billion yuan nearly 1.5 billion Usd In this reuters story from back then Depositors at the bank said that they Had been communicating with each other Via wechat as to how they could retrieve Their funds At the time the south china morning post Spoke to half a dozen depositors who Said they had not been able to withdraw Funds either online or in person with Total deposits ranging from 200 000 yuan To over 1.5 million yuan 29k usd to 220k Usd According to this man in shanghai quote My friend recommended the bank saying it Had high interest rates i can’t access The app right now there was also Ambiguity as to whether the deposits With these banks were backed by the Banking regulator which further added to The confusion and anger As more and more of these stories spread People decided that they were going to Protest at these banks Images started to emerge of citizens Outside the local office of the china Banking and insurance regulatory Commission in zhengzhou city they were Carrying signs that read return my Savings and other perfectly reasonable Demands

Of course being china news of the Protests was heavily suppressed Protesters were quote pushed around by The local police with brute force and Were blocked from entering the city But perhaps most dystopian of all Citizens who were thought to be Travelling into a city to protest had Their covered green passes mysteriously Turn red when they arrived at city Checkpoints Now in a country like china having a red Covet pass means being sent to a Government-mandated quarantine facility Can’t imagine that as much fun Some protesters were escorted to these Facilities by armed guards others were Detained and then sent out of the city On returning trains However the moment that they got back to Their home provinces their covert passes Just as mysteriously turned green again Just wait until they link up those Passes to the cbdc china is rolling out Anyways despite these measures the Protests didn’t stop in fact they got Bigger Now i’d just like to give a quick shout Out to all those new viewers out there Today if this is the first time that You’re watching coin bureau my name is Guy and on this channel we cover Everything you just have to know from Finance to crypto and global macro we’re

Unsponsored and don’t run ads so you can Get the most impartial and unimpeded Viewing experience If that’s something you want more of Then i would really appreciate it if you Could give me a subscribe ping that bell As well to make sure that youtube will Give you a bell as well when a new video Is served okay Back to our scheduled program In mid-july more than one thousand People staged a protest outside the Jungle branch of the pboc This was one of the largest protests Since the pandemic began and it’s safe To say that the government did not like It That’s why they sent in the police and Other security personnel Many of them were in plain clothes as They descended on the protesters People were violently beaten and taken Away for peacefully protesting the loss Of access to their frozen funds These scenes played out on the news and Despite the best attempts at censorship Were also shared on local messaging apps Like wechat In the days after the protest the Government claimed that they had Arrested members of a criminal gang that Was responsible for the crisis they Claimed that the gang had taken control Over the henan banks and leverage their

Shareholdings by quote manipulating bank Executives When it came to those who had deposited Their funds with the banks the Government said that it would partially Be covering these deposits with a Compensation plan The plan promises to cover those who had Deposits of up to fifty thousand yuan About seven and a half thousand dollars Of course this didn’t help all those Depositors who had larger sums with the Banks There were vague promises about them Being able to reclaim more later but They would have been of little Consolation to those whose life savings Were tied up in institutions they Thought were fully creditworthy But the real concern here is not what Happened to these four rural banks but Whether the fear could spread to many Other rural banks Remember that there are close to 3 800 Of such institutions and they hold a Gargantuan amount in deposits What happens if the stories of these Depositors who lost their life savings Start to permeate out What happens if other people in the Country start to grow edgy about their Deposits and therefore decide that it’s Best to just withdraw first and ask Questions later

The reason why bank runs are so deadly Is because often it’s merely the rumor Of a bank run that can cause one people Will rush to the bank to withdraw and This will cause the bank to have a Liquidity crunch If they don’t have the cash on hand then It means that they will have to restrict Withdrawals this creates even more panic And so on there’s also no guarantee that The panic will be contained to only the Rural banks In this climate of uncertainty in a Country not known for transparency cash Is king The main question now is whether the Banks in china remain well capitalized Enough to be able to pay out withdrawal Requests Well yeah About that You see china is going through a pretty Rough economic patch at the moment and That’s not because of rural banks which Promised high returns One of the biggest risks to the chinese Economy is those over leveraged property Developers now i talked about this in Much greater detail last year when i Covered the evergrand situation linked To below But since then things have only gotten Worse Now because it’s hard to get a reading

Of the credit distress within the Country it helps to take a look at the Offshore bond market As you no doubt know evergrand defaulted On its dollar bonds earlier this year And it seems as if the trend is only Going in one direction So far this year bond delinquencies have Already exceeded 26 billion dollars And the rot has begun to spread to other Much larger property developers Here you can see the dollar bond prices Of some of china’s largest developers These include the likes of country Garden and vanki both of which have Almost double the sales of evergrand These are tanking which means that there Is renewed skepticism about the Potential for these developers to be Able to pay their debts going forward While the evergrand default could have Been absorbed a collapse of these two Other developers could have cataclysmic Results for the economy And while these are offshore bonds you Should also not forget that these Developers have immense onshore debt as Well The holders of this debt are the banks In china that have lent to the Developers There are also a number of other Businesses that hold opaque commercial Paper issued by these developers

These include not just banks but Suppliers contractors and other Businesses that operate in the Construction supply chain Here’s the crazy thing though because This commercial paper has been seen as An asset it has also been used as Collateral and a quasi currency Banks would give out loans to businesses That held this commercial paper on the Assumption that it was as good as cash I mean for a property developer in a Country with a rock-solid real estate Sector banks were more than willing to Hold this on their balance sheets The only problem is that this commercial Paper is not cash and when people are Demanding their deposits back they don’t Really want to get commercial paper So banks could find themselves in a Precarious position where they have a Balance sheet that’s deteriorating by The day and demands from their creditors Their depositors for their funds back This is an issue which would extend far Beyond just the rural banks to include The likes of the larger commercial banks In the country But if you think that’s where the Problems end for chinese banks then i Hate to break it to you but they are Exposed not only to the developers that Built these homes but also those people Who bought said homes from the

Developers Given that property has been seen as one Of the best investments over the past Few years chinese citizens have been Snapping it up Many were more than happy to put down And deposit on an apartment that didn’t Yet exist They also had no qualms about buying These apartments with debt and taking Out mortgages their thinking was that as Long as the prices went up and demand Was there they could always flip at a Profit and pay off the debt The banks had a similar thinking as to The collateral value of the homes and Were therefore happy to issue mortgages The only problem is that because these Property developers have been in trouble There have been substantial delays to Some of these projects In some cases people were delivered Half-built houses In other cases they had nothing Delivered at all Now it also doesn’t help that home Prices have been falling across the Board in china So what you had was a situation where People were paying a mortgage for a home They didn’t have access to and which was Also falling in value To protest what many thought was an Injustice they also stopped paying their

Mortgages Home buyers across 22 cities have Refused to meet their payment Obligations This is putting a strain on bank balance Sheets as they don’t earn that interest Income which they can then use to pay Out their depositors It’s also not as if they can take Ownership of the houses because well They haven’t even been built So essentially you have a dire situation In which banks are being squeezed in all Directions They’re exposed to the developers they Are exposed to the home buyers they’re Exposed to everyone that has taken on Commercial paper as debt A bleak picture indeed So it’s perhaps for this reason that Chinese bank stocks have been taking a Tumble China’s csi banks index has fallen to a Two-year low on these contagion fears But at least they can count on some Strong robust economic growth Right Well last week china reported its Advanced estimates for q2 gdp growth This came in at 0.4 percent and it was one of the Slowest since the start of the pandemic It was also way below the 4.8 percent Recorded in q1 and even below most

Analysts estimates Of course that’s if you even believe That in a time when the country had some Of its most restrictive lockdowns in its Biggest cities it was somehow able to Achieve any growth at all I talked about this in much greater Detail in my video about chinese gdp Which i will pop in the description for You Now irrespective of what the true growth Rate is it’s still a pretty Unprecedented slowdown for the country It also points to the fact that there Are broader stresses in the country that Extend beyond just the property sector Stresses that could further add strains To bank balance sheets let’s just hope They don’t have a whole host of anxious Depositors turning up at their branches Demanding their money back all at once Ok time for a few closing thoughts on This mess it’s quite clear that china’s Economy is sailing through some stormy Seas Then again nearly all economies are but The difference is that we now know how High the waves are Given the suppression of speech and Manipulation of data in china it’s hard To tell whether its economy will be Swamped by the waves it’s trying to Navigate I also wouldn’t expect any sort of

Transparency to be forthcoming in fact Over the next couple of months we’re Likely to see even further crackdowns on Dissent and protests as xi jinping Prepares for the 20th party congress Can’t have the news of economic turmoil Spoiling the big party can we These bank runs are just a symptom of a Larger issue that plagues china a lack Of transparency and an erosion of trust In the powers that be The more the authorities attempt to Suppress these stories the more people Will begin to worry about the safety of Their savings And of course they have good reason to Worry That’s because their savings have been Loaned out rehypothecated and loaned out Again They may be tied up in some developer Debt or perhaps they went towards Someone’s mortgage The banks are now struggling to recoup These funds and their balance sheets are Getting impacted in the process China has a slowdown in economic growth And there is no guarantee that we won’t See a reversion to some draconian covert Measures especially in the lead-up Disease third term It’s going to be interesting to see how All this plays out either it turns out To be an economic tempest of titanic

Proportions or nothing more than a storm In a teacup either way it’s something i Am going to be keeping a very close eye On And that’s it for my video today folks I’d love to get some of your feedback Though so do you think that china is on The brink of an economic meltdown how Could this affect countries in the west Share your thoughts in the comments Below if you don’t have a comment that’s Cool you may also be interested in my Socials page This is the page where i share exclusive Content that you’re not getting here Telegram tik tok instagram twitter and My newsletter the links to all of those Are in my socials page below Oh yes and if you like this little Number then you can pick it up in my Merch store All sales go to help keep the channel ad Free so thank you in advance for your Support Link to merch store also in the Description you can’t miss it Finally if you found this video helpful Slap a like on it subscribe and ping That bell as well to make sure you never Miss another one time’s up for this guy But i will be seeing you guys very soon This is guy bidding you Goodbye [Music]


Coinbase is a popular cryptocurrency exchange. It makes it easy to buy, sell, and exchange cryptocurrencies like Bitcoin. Coinbase also has a brokerage service that makes it easy to buy Bitcoin as easily as buying stocks through an online broker. However, Coinbase can be expensive due to the fees it charges and its poor customer service.

Leave a Comment

    • bitcoinBitcoin (BTC) $ 42,422.00 2.86%
    • ethereumEthereum (ETH) $ 2,251.95 3.31%
    • tetherTether (USDT) $ 0.999525 0.06%
    • bnbBNB (BNB) $ 233.89 1.71%
    • xrpXRP (XRP) $ 0.625483 4.08%
    • solanaSolana (SOL) $ 69.54 2.48%
    • usd-coinUSDC (USDC) $ 1.00 0.06%
    • staked-etherLido Staked Ether (STETH) $ 2,250.99 3.29%
    • cardanoCardano (ADA) $ 0.558047 2.88%
    • dogecoinDogecoin (DOGE) $ 0.098761 1.23%