Evergreen’s economic crisis triggers a banking panic in northern China.

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Evergreen crisis boils over and triggers bank run in China's Cangzhou prefecture

Multiple reports indicate that the fall of Chinese real estate developer Evergrande triggered a bank run in northern China last week. The bank run began after rumors circulated that financial institution Bank of Cangzhou had loaned billions to the struggling company. This development followed Evergrande's announcement of the incarceration of its founder Xu Jiayin.

Evergrande, the Chinese real estate giant, filed for Chapter 15 protection from creditors in New York court on August 18, 2023. The company expanded rapidly during China's real estate boom and was once among the top real estate developers in the country.

However, its aggressive growth was financed by considerable debt, and as of 2021, it had accumulated over $300 billion in debt and liabilities. Before his fall, concerns were raised, both in China and globally, about significant financial repercussions.

The collapse of Evergrande is not a minor incident; its reach resonates deeply in China’s economic fabric. Furthermore, its debt tentacles extend to banks in countries like Australia, the United States, Canada, the United Kingdom and beyond.

In particular, both CNN and Asia Times reported a surprising bank run at the Bank of Cangzhou, triggered by rumors of contagion. Panic withdrawals are rarely observed in China. The financial institution, with its numerous branches, is located in a prefecture approximately 160 kilometers from Beijing.

News of the bank run has spread across social media recently, with people sharing images and videos of the event on platforms such as X (formerly Twitter). State media Yicai reported that Cangzhou police arrested several people for spreading rumors and that a police guard post was at the bank entrance.

The Bank of Cangzhou continued to assure the public of the security of its deposits. To highlight its creditworthiness, reports indicate that lavish stacks of yuan were displayed prominently in the bank's lobby. The People's Bank of China (PBOC) reportedly provided the bank with emergency financial assistance as soon as possible, according to some sources.

The last time China experienced bank runs was in April 2022, when four rural banks in Henan province suspended withdrawals and affected deposits to the tune of $1.5 billion. Banks New Oriental Country Bank of Kaifeng, Shangcai Huimin County Bank, Yuzhou Xin Min Sheng Village Bank and Zhecheng Huanghuai Community Bank initially cited “maintenance work” as the reason.

However, residents soon discovered that these institutions were under financial investigation. Meanwhile, shortly before last week's bank run, reports emerged of the arrest and ongoing investigation of Evergrande founder Xu Jiayin.

What do you think of the collapse of Evergrande, which caused a bank run in northern China? Share your thoughts and opinions on this topic in the comments section below.