Large Chinese Bank Protest Put Down With Violence (#GotBitcoin)
Video from clash in Central Chinese city spreads online despite censorship; officials had prevented earlier protest using Covid-19 health codes. Large Chinese Bank Protest Put Down With Violence (#GotBitcoin)
HONG KONG—Hundreds of bank customers demonstrating over frozen deposits were attacked by men in plainclothes in the central Chinese city of Zhengzhou, marking a violent end to one of China’s largest public protests in recent years.
Images of the clash, which was widely videotaped, spread quickly enough on Chinese social media to outrun the country’s army of internet censors, sparking a wave of online criticism.
Video footage verified by The Wall Street Journal with protesters who were present on Sunday showed large numbers of unidentified men, many of them dressed in white T-shirts, barreling into peaceful crowds demonstrating on the steps of the local branch of China’s central bank.
The clash resulted in several injuries, according to the protesters, who said they were themselves beaten by the men in plainclothes.
The Zhengzhou government didn’t respond to a request for comments.
It was the second protest launched by customers of four Zhengzhou banks after the lenders froze their accounts amid a government investigation into financial misconduct. The first, smaller protest occurred in May and ended with a similar clash.
Another protest attempt in June was foiled by the local Zhengzhou authorities, who used a health code designed to control Covid-19 to restrict the movements of petitioning bank customers. The pre-emptive operation, while successful in preventing the protests, drew a wave of criticism nationally and resulted in the firing of several local officials accused of abusing the health codes.
When the protesters regrouped in Zhengzhou over the weekend, local authorities resorted to more traditional means, but those, too, caught the public eye.
The protesters originally planned to return to the local headquarters of the national bank regulator, where they had gathered in May, but on a scouting trip Friday night they found it was heavily patrolled by the police, according to one of the protesters, a Beijing-based businessman who gave his surname Yang.
Instead, Mr. Yang said, many woke up at 4 a.m. on Sunday and gathered before at the entrance of the local branch of the People’s Bank of China, the country’s central bank.
By daylight, hundreds of protesters had arrived, holding banners that demanded the protection of their rights and return of their deposits. Some waved China’s national flag, a tradition among petitioners meant to appeal to the central government for help.
Mr. Yang said more protesters participated in the most recent protest because of their frustration with the government’s response.
In May, banking regulators accused the four lenders in Henan, where Zhengzhou is located, of illicit public fundraising, a financial crime. The regulator later referred to the holders of frozen deposits as “consumers of financial products” rather than “bank depositors,” suggesting their money might not be covered by deposit insurance.
Policemen in blue uniforms arrived later in the morning on Sunday, followed by a large squad of young men dressed in white shirts, Mr. Yang said. One online video showed the plainclothes men locking their hands to form a blockade and prevent protesters from leaving.
At around 11 a.m., the plainclothes men crashed into the crowd and started to grab people by force, according to video and witnesses. Mr. Yang said he was dragged onto one of several nearby buses by four plainclothes men, and one of them beat him several times in the head and chest.
“The police just watched from a distance,” he said.
The public fight over the frozen deposits has gone on for an unusually long time in a country where authorities typically move quickly to resolve or crush sources of discontent.
On Sunday, local police said they were further investigating a criminal group they accused of absconding with the deposits.
Provincial bank regulators in Henan also released a brief notice saying a plan was being worked out to handle the crisis and asking bank customers to register their personal details.
On Monday, the regulators added that advance payments would be made to the legitimate accounts starting July 15, and first to the smaller ones.
The banks didn’t respond to requests for comments.
On China’s Twitter-like social-media site Weibo, censors worked in vain to staunch the flow of footage from Sunday’s clash. The images agitated internet users, many of whom were familiar with the bank customers’ cause following the earlier health-code controversy.
“What have the ordinary people done wrong?” one Weibo user wrote on Monday afternoon, reflecting a sentiment common across the site. “They got beaten up after they lost their money?”
Despite years of nationalist messages painting Western governments as hostile to China, some protesters appeared to appeal to foreign audiences by hoisting a banner in English that read, “Against the corruption and violence of the Henan government.”
Some left sarcastic messages on the U.S. Embassy’s official Weibo page intended to indirectly draw attention to the Henan protesters.
“Under no circumstances should you get involved in anything in Henan,” read one comment. “The Henan police will handle them.”
After the clash on Sunday, Mr. Yang said, he was among more than 100 protesters that were taken to a local school, where each of them was made to take a Covid test. After several hours, those who had bought airplane and train tickets to leave the city were let go first.
Mr. Yang, who said he spent a night at a local friend’s house and boarded a high-speed train out of town on Monday morning, suggested it might not be the last time he visits Zhengzhou.
“The government only responds after we protest,” he said.
China Fires Official For Abusing Covid-Tracking Codes To Thwart Protesters
Four others also punished after a wave of public anger over the use of pandemic surveillance as a tool for broader social control in central city of Zhengzhou.
A central Chinese city has fired one of its top security officials and punished several others for using a Covid-19 tracking system to thwart protests over alleged bank fraud.
Two officials in charge of pandemic control in the central Chinese city of Zhengzhou switched the health codes of more than a thousand bank customers to color red—which indicates high risk related to Covid-19 infections—“without authorization,” the city’s anticorruption agency said in a statement released late Wednesday.
The red codes were used by local authorities to justify restricting the movements of bank customers who planned to join protests against four rural banks accused by regulators of illicit public fundraising.
One of the two officials, Feng Xianbin, a veteran police officer who was the second in command in the Communist Party’s security and legal affairs branch in Zhengzhou, was stripped of both his party and government titles.
Four other officials involved in switching the codes were demoted or received internal admonishment, the statement said, calling it a case of “reckless behavior.”
Mr. Fang couldn’t be reached for comment. Calls to Zhengzhou’s anticorruption agency rang unanswered.
The punishment, announced a week after reports of the health-code switching set off a firestorm on Chinese social media, reflected the social scrutiny the city has faced.
Many members of the public, already tired of rigid social restrictions linked to Covid-control measures, expressed alarm at how a surveillance system created to track Covid risks was used as a tool for broader social control and how authorities appear to have breached privacy by obtaining customers’ financial information.
As public criticism reached a crescendo, Chinese state media came out to criticize Zhengzhou and the government of Henan province, of which Zhengzhou is the capital, issued a statement saying the codes should only be used in connection with disease control.
The people affected were among hundreds of thousands of customers of four rural banks in the region that have been accused of financial misconduct. Many had planned to protest in Zhengzhou after the banks froze their savings accounts.
Zhengzhou’s anticorruption agency said a total of 1,317 bank customers had their codes flipped red, including 871 people who didn’t even come to the city. The city didn’t say how its officials in charge of Covid control had identified the banks’ clients.
Earlier this week, the banks asked the affected customers to register their details online, after financial regulators in Henan confirmed the banks were under investigation.
The punishment meted out to the Zhengzhou officials struck many on Chinese social media as too light, with several users comparing it to reports of ordinary citizens being detained and briefly jailed for attempting to cheat the Covid-tracking system.
Xu Zhihao, one of the bank protesters who was expelled from Zhengzhou after his code was flipped red, said the officials’ punishment avoided the more important issue.
“Who gave the depositors’ data away?” he said.
In One Chinese City, Protesters Find Themselves Thwarted By A Red Health Code
Experience of aggrieved bank customers prompts accusations that authorities used Covid health codes for social control.
Ye Mijian had gone to the central Chinese city of Zhengzhou to join a protest against some local banks that had frozen his and others’ deposits. The protest plan was thwarted after his health code, which authorities use to track Covid-19 risks, and that of many other would-be protesters turned red.
Mr. Ye said that as soon as he arrived in Zhengzhou and scanned the code on his smartphone to exit from the train station, his green code switched color, prompting local officials to confine him in a hotel.
Two days later, when he left the region without having been able to carry out his protest plan, the code flipped back to green, he said.
Mr. Ye’s experience echoes accounts by other customers who had been petitioning against four rural banks in the region accused of financial misconduct.
Their experience prompted a broad outpouring of concern on Chinese social media as well as in state publications that authorities in Zhengzhou and the surrounding Henan province were using the health code for social control.
Authorities in Zhengzhou and Henan haven’t provided an official explanation of why the codes of Mr. Ye and others were switched and then switched back. Neither Zhengzhou nor provincial authorities responded to requests for comment.
In between the change of colors, Mr. Ye and others say dozens of bank customers who had come to Zhengzhou to protest and whose health codes had also turned red were grounded inside a remote hotel. For Mr. Ye, the setting was familiar.
In May, he said, he spent some time confined at the same hotel by local authorities after he and hundreds of bank customers held signs outside the local headquarters of the bank regulator, demanding the return of their savings.
“Last time, we were taken here after we managed to stage a street protest,” he said, lamenting that on this visit he didn’t get farther than the train station. “This time, I couldn’t move an inch.”
By midweek, similar accounts posted on Chinese social media, with screenshots of the red labels included, prompted the hashtag #Henan Red Code# to go viral on the Twitter-like Weibo platform.
Many who posted about it criticized Zhengzhou and Henan authorities, accusing them of using the health codes for other purposes than the intended ones and likening the codes to digital shackles.
“If other cities follow this kind of abuse, there will be nothing left to the rule of law,” Wang Cailiang, a Beijing lawyer, said on his Weibo account.
In a sign of apparent central-government displeasure with Henan and Zhengzhou authorities, state media broadly reported the incident and the public outrage, while several Communist Party outlets published blunt criticisms.
“Obviously such an operation is the opposite of common sense, rule of law and axiom,” said a commentary on Tuesday in one of the social-media accounts run by the official People’s Daily.
In response to an inquiry about the protesters’ experience in Zhengzhou, China’s National Health Commission said that the health codes are designed strictly for Covid, adding, “It is absolutely not allowed to apply factors that are not related to disease control.”
China’s color-labeled health codes, embedded in smartphone apps shortly after the pandemic began in early 2020, track people’s movements and Covid test results.
Linked to a person’s identification details, the codes become digital passes that authorities can use to control people’s day-to-day movements. Once a code turns red, authorities can take measures, such as taking the person to a quarantine facility.
“They effectively give each resident a risk credit rating,” Hu Yong, a Peking University scholar, wrote in March in an essay about data ownership.
Overseas researchers and human-rights activists have warned of risks of privacy breaches as authorities incorporate the codes into China’s digital-surveillance system. The Chinese Foreign Ministry dismissed such concerns in July 2020, saying the system helps control health risks while protecting individual privacy.
The Chinese public has generally made few objections to sacrificing some personal privacy during the pandemic, and many have grown accustomed to showing the codes wherever they go, though recently many have expressed fatigue with lockdowns and having to regularly line up for tests.
In May, shortly after the China Banking and Insurance Regulatory Commission said that four Henan lenders were involved in what China terms illicit public fundraising, a financial crime, hundreds of customers went to Zhengzhou to try to get their money back.
A regulatory investigation is under way, the official Xinhua News Agency reported in May. The four banks have made no public statements regarding the probe on their official accounts on the WeChat social-media platform and didn’t immediately respond to requests for comment.
One bank depositor said that while he was in Zhengzhou with his girlfriend in May, his health code turned red while hers stayed green. He said local officials called and urged him to leave town. After he showed them departure train tickets, the code switched back to green as he said the officials had promised.
Some depositors suspect that they had been identified as potential protesters after they logged their complaints about the bank to get authorities to help recover their money.
Max Zhang, an engineer living in another province, found his health code flipped to red earlier this week, with a line saying it had been flipped by Henan authorities remotely.
Mr. Zhang said he had deposited 700,000 yuan, equivalent to around $104,000 with the rural banks, including inheritance money from his deceased mother, but wasn’t planning to go to Zhengzhou.
Without a green health code, he said, he was in a quandary over how to get into an auto-repair shop to get his car fixed—and ended up pretending he had forgotten his phone at home to gain access to the shop. His code is now back to green.
When Xu Zhihao, a depositor from Tianjin, received his red code in Zhengzhou, he was forced to spend a night at a university library before being escorted onto a return train the next day by local officials, he said.
As soon as he showed the red code, the train attendant put on protective gear and evacuated the passengers around him. He got the green code back once the train left Henan province, but that didn’t help his status on the train.
“The passengers gave me that weird look the whole journey,” he said.
Global Investors Dump Bonds Of Chinese Banks That Lent Heavily To Russia
State-owned lenders such as China Development Bank extended tens of billions of dollars to Russian borrowers.
International investors are rapidly unwinding what was once a popular trade in Chinese bonds.
For years, foreigners loaded up on debt from Chinese state-owned lenders known as policy banks, which fund domestic and overseas projects like dams, roads and airports. The easy-to-trade yuan-denominated bonds were viewed as almost as safe as China’s sovereign debt, and paid higher interest rates.
Russia’s invasion of Ukraine has prompted a rethink of those investments. The U.S. and allied countries imposed heavy sanctions on Russia, raising the possibility of secondary sanctions on other countries or institutions that continue to aid Moscow.
Two of the three Chinese policy banks, China Development Bank and the Export-Import Bank of China, have lent billions of dollars to Russian borrowers that needed funding for uses including energy projects. They have been mostly silent about their exposures to Russia since the war broke out.
The two banks didn’t respond to requests for comment.
Since February, global investors have unloaded $27 billion in yuan-denominated Chinese policy-bank bonds, or about a sixth of their total holdings of such debt. The selling pace picked up sharply in May, according to data from China Central Depository & Clearing.
The outflow is part of a $61 billion exodus from yuan bonds since February, spurred in part by weakness in China’s currency and a shrinking yield advantage over U.S. debt. It suggests that private-sector investors, like fund managers, have been faster to sell down than public ones such as central banks.
Since the invasion, some investors have been redeeming their investments in China bond funds, said Edmund Goh, Shanghai-based head of China fixed income at Abrdn. The main reason they give is geopolitical risk in China, though they are also concerned about some “anticapitalist regulations” introduced by Beijing in recent months, he said.
Unlike many countries, China hasn’t condemned the invasion. While the country’s financial institutions have an interest in complying with the sanctions, its government says “sanctions are never fundamentally effective means to solve problems.”
Under a 2017 law, the U.S. can penalize foreign entities that trade with sanctioned companies, countries and individuals. Such secondary sanctions could cripple many Chinese banks and institutions by barring them from conducting transactions in dollars.
China’s cabinet, the State Council, created its three policy lenders in the 1990s. CDB, Exim Bank and the Agricultural Development Bank of China are akin to national-development banks and export-credit agencies in other countries.
They carry out Beijing’s economic orders, finance large domestic projects—even if they aren’t highly profitable—and support Chinese companies’ overseas expansion.
From 2000 to 2017, CDB and Exim Bank issued loans worth more than $73 billion to Russian state-owned enterprises and financial institutions, of which about $50 billion is still outstanding, AidData statistics show.
AidData, a research lab at The College of William & Mary that tracks China’s global lending activities, calculates the figures in inflation-adjusted U.S. dollars and excludes loans for projects that didn’t go ahead.
There have been further loans to Russia more recently. For example, in late 2021 the two banks jointly provided credits amounting to €2.5 billion, equivalent to $2.54 billion, to a borrower known as Arctic LNG 2 LLC, according to data provided to The Wall Street Journal by Brad Parks, AidData’s executive director.
In 2018 CDB signed a 12 billion yuan—equivalent to $1.79 billion—loan agreement with Russian state-owned development corporation VEB, and the next year it arranged and co-financed a €3.4 billion syndicated loan for a subsidiary of Russian energy company Gazprom PJSC, data from Mr. Parks showed.
Policy-bank bonds play a comparatively large role in the portfolios of many large yuan-denominated bond funds, helping explain the recent selling pressure.
The biggest such vehicle, BlackRock’s $6.1 billion iShares China CNY Bond exchange-traded fund, had about half of its assets invested in debts issued by the three policy banks. The ETF, which tracks the Bloomberg China Treasury + Policy Bank Index, shrank by nearly a third in May alone.
In this round of outflows, central banks and sovereign-wealth funds, which typically hold more sovereign debt than policy-bank bonds, have been less-active sellers, said Wai Ho Leong, chief economist at Modular Asset Management.
“The larger outflows from policy-bank bonds than Chinese government bonds reflect the holding structure of foreign asset managers, which is weighted towards policy-bank bonds,” he said.
Some market watchers say the Russian ties aren’t the main reason for the selldown. Bo Zhuang, a senior sovereign analyst at Loomis Sayles, said policy-bank bonds had been popular as liquid investments that offered higher yields than government bonds.
The primary factors driving foreign investors to pare holdings of both kinds of bonds are the weaker yuan and the shrinking yield differential, he said.
The 10-year Treasury note yielded 3.10% on Friday, versus 2.83% and 3.08%, respectively, for comparable debt from the Chinese government and CDB, according to data from Tullett Prebon and Wind.
The policy banks have also borrowed extensively in international markets, selling debt in currencies such as the dollar, yen, euro and Hong Kong dollar. A CDB dollar bond due 2037 was recently quoted at 98.2 cents on the dollar, for a yield of about 4.17%, according to Refinitiv. At the end of last year, it was trading at more than 115 cents on the dollar.
China Prepares For Possibility Of More Economic Stimulus
* Economy Probably Expanded At The Slowest Pace Since Early 2020 * PBOC Expected To Hold Policy Rates, But Stimulus Seen In 2H
China will unveil a bumper set of economic indicators this week that will likely set the pace for monetary and fiscal stimulus for the rest of the year as Beijing chases down its ambitious growth target.
Key data — from gross domestic product and retail sales to fiscal revenue and bank borrowing — will be closely watched to assess the damage of Covid lockdowns during April and May and the strength of the rebound since then as restrictions were eased. The figures will also give clues on the state of the property market, a major drag on growth this year.
Beijing is betting on a stronger second half of the year for the economy as business activity picks up pace and local governments ramp up spending on infrastructure.
Even so, meeting the growth target of around 5.5% will prove challenging, especially as China sticks to its stringent Covid Zero policy, with restrictions tightened wherever outbreaks occur. President Xi Jinping recently signaled he’s willing to sacrifice some short-term growth to protect his people’s health.
Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc, said if the full-year target can’t be reached, the government would want to achieve growth in the second half of the year of around the 5.5% mark. Economists surveyed by Bloomberg predict the economy will likely expand just over 4% for the full year.
“There’s still a pretty long distance toward hitting the annual growth target,” said Ding. “There should be further policy support.”
The country’s fiscal and monetary authorities are scheduled to publish government finance as well as bank loan figures this week that could give clues about possible stimulus. In particular, investors are watching closely if Beijing will allow local governments to accelerate their borrowing by possibly selling 1.5 trillion yuan ($220 billion) of special bonds in the second half of this year.
Calls for more policy support are growing within official circles too. A former finance minister said this weekend that China has room to widen its budget deficit to provide more support for businesses.
An official from the banking regulator and insurance regulator said at the same event that authorities will use policy tools “flexibly and precisely” to stabilize the economy.
A researcher from the State Council’s Development Research Center said China will need to adopt “unconventional policies” in the second half to achieve the government’s full-year growth target, the Economic Daily reported Monday.