Why don’t Chinese banks return people’s money now? Will the financial crisis like that of 2008 happen?


New Delhi: Many local banks in China have frozen cash withdrawal. Banks do this to avoid a severe cash crisis. For this reason, customers cannot withdraw their money deposited in these banks. In fact, Chinese banks are going through a bad phase. In recent years, there have been many such circumstances, due to which the condition of these banks has become thin. First the Covid-19 pandemic and then the real estate slump caused a lot of damage to these banks. Some experts liken this to the bursting of the US housing bubble, which led to the 2008 financial crisis.

Tells protesters Covid positive

Since April this year, customers of many local banks in central China’s Henan and Anhui provinces have been unable to withdraw their money. As soon as people started to protest, the local administration tried to calm them down. In Henan, protesters’ COVID status was red flagged on a mandatory phone app to keep them indoors. Videos of “government-backed” goons attacking protesters have also surfaced.

4,00,000 bank customers concerned

Beijing claims a gang of criminals robbed banks by embezzling money through fraudulent loans. Banks are already in trouble due to the economic slowdown resulting from the Corona epidemic and the defaulting of loans by builders. However, the government allowed small withdrawals. Reports indicate that around 4,00,000 bank customers have been affected by the withdrawal freeze, which involves deposits of around $6 billion. While that amount would be a drop in the ocean for China’s banking system, experts warn of systemic problems in China’s economy.

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the problem is quite serious
Real estate and related industries are said to account for a third of China’s $17.5 trillion GDP. For most of the Chinese middle class, it is a major source of investment. This sector represents a third of the total debt of Chinese banks. That’s why veteran property developer Evergrande Group’s default last year was a major setback. Evergrande’s share price had fallen sharply due to reports of a severe cash crunch. This has led to a reduction in foreign investment in China. The company still owes more than $300 billion to investors and lenders.
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Real estate companies had borrowed huge sums

Chinese real estate companies borrowed heavily on large projects during the boom years. Experts say there has been a sharp drop in productivity and economic growth during Covid. Sales have been hit hard due to China’s “zero tolerance” policy. It is difficult for builders to complete and deliver projects on time. At the same time, buyers halted loan repayments due to construction delays. If more people stop repaying the loan, it could lead to poor cash flow for developers and further delays in projects.

AfDB lowers Chinese GDP growth forecast

Amid deteriorating conditions, the Asian Development Bank has lowered its growth forecast for China. According to the AfDB, the Chinese economy is now expected to grow by 4.6% in 2022. The AfDB had previously given a forecast of 5.1%. In the second quarter, China recorded year-on-year growth of just 0.4%, the weakest since the start of the pandemic. Rising inflation in the United States and the weakening of the yuan against the dollar could increase China’s problems. Investors are also worried about China’s stock and bond markets.

Source: navbharattimes.indiatimes.com

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