Watch: Protests erupt in Henan province as China’s economy stagnates

Protests over frozen bank accounts and mortgage payments for unfinished homes in China’s Henan province have erupted as the country’s economy stagnates. In an effort to boost demand for credit and help the Covid-hit economy, China’s central bank unexpectedly cut a key interest rate for the second time this year and withdrew liquidity from the banking sector on Monday. Economists and observers say the Chinese government is keen to help the weak economy by allowing a growing policy divergence from other major nations that are raising interest rates sharply.


General credit growth slowed in July in China as further Covid surges, employment concerns and a deepening housing crisis made businesses and consumers reluctant to take on more debt. New bank lending fell more than expected during this period. Since the banking system was already overflowing with liquidity and interbank money market rates were continuously below key rates, market participants largely priced in partial refinancing.

The figures point to a crisis of confidence among Chinese households and businesses, posing a new threat to the global economy as demand for everything from Apple iPhones to luxury items declines. At the same time that the prices of commodities like iron ore and copper are falling, a deterioration in the real estate decline is being felt both domestically and internationally.

Large-scale stimulus programs have been ruled out by Chinese leaders, who have also pledged to stick to the strict “Zero-Covid” policy which requires that when major outbreaks occur, as is currently the case on the tourist island of Henan, the authorities must close businesses and lock up the population. The growth projection for the rest of the year has therefore been lowered further below 4%, according to experts.

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Earlier, on July 10, more than a thousand enraged customers demonstrated in force outside a Bank of China site in Henan, demanding the return of their investments. To put an end to the demonstration, the local authorities used civilian clothes. Since April, four rural banks in China’s Henan province have frozen millions of dollars in savings, jeopardizing the livelihoods of thousands of consumers in an already fragile economy due to Covid lockdowns.

(with contributions from agencies)

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Post expires at 12:01pm on Friday August 26th, 2022