Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

In April this year, four banks in the Henan province of China announced that they were freezing

deposits of around $6 billion while they

updated their IT systems.

Depositors worried at first, but began to panic in late April when they learned that a major

shareholder of the four banks had been arrested for serious financial crimes.

A few months later news hit of a group of homebuyers around China

who were threatening to stop making mortgage payments on apartments in building projects

that had yet to be completed. While Chinese media has portrayed these two stories as minor

events that are unrelated to each other and driven by very specific

local circumstances. They might instead be symptoms of a much greater issue in the Chinese

financial system. The frozen bank deposits led to protests and then bank runs. Then on May 21st, a large demonstration was held outside the

office of the China Banking and Insurance Regulatory Commission. Police stepped in to disperse

the protesters, but this only drew national attention to what was going on. Municipal authorities

even changed the COVID public health codes

for people travelling to the protests, preventing them from using public transportation

or assembling in public spaces. This abuse of the public health systems led to outrage throughout

China, causing the government in Beijing to intervene.

Local authorities initially claimed that the red health codes were caused by a computer glitch,

but after an investigation, five local officials were punished for wrongdoing.

The protests didn't end, and on July 10th, a larger protest outside the People's Bank of China

turned violent as the peaceful protesters were violently attacked, leading to numerous hospitalizations.

...