ugc_banner

Watch: Protests break out in Henan province as Chinese economy stagnates

Henan, ChinaEdited By: Chaheti Singh SisodiaUpdated: Aug 17, 2022, 08:30 PM IST
main img
Photograph:(Reuters)

Story highlights

Broad credit growth in China slowed in July as new Covid flare-ups, job-related concerns, and a worsening real estate crisis made businesses and consumers reluctant of taking on additional debt. New bank lending fell more than predicted during this time. Since the banking system was already replete with cash and interbank money rates were continuously below policy rates, market players have largely factored in the partial rollover.

Protests have erupted in China's Henan province over frozen bank accounts and mortgage payments for unfinished homes as the country's economy stagnates. In an effort to boost credit demand and assist the Covid-affected economy, China's central bank unexpectedly reduced a key interest rate for the second time this year and withdrew some cash from the banking sector on Monday. According to economists and observers, the Chinese government is eager to assist the weak economy by allowing a growing policy divergence from other major nations that are sharply hiking interest rates.

×

Broad credit growth slowed in July in China as new Covid flare-ups, job-related concerns, and a worsening real estate crisis made businesses and consumers reluctant of taking on additional debt. New bank lending fell more than predicted during this time. Since the banking system was already replete with cash and interbank money rates were continuously below policy rates, market players have largely factored in the partial rollover.

The figures point to a confidence crisis among Chinese households and businesses, which poses a new threat to the global economy as demand for everything from Apple iPhones to luxury items declines. At the same time, when commodity prices like iron ore and copper are falling, a deteriorating property downturn is being felt both domestically and internationally. 

Large-scale stimulus programmes have been ruled out by China's leadership which has also vowed to stick to the strict 'Zero-Covid' policy that mandates that when major outbreaks take place, as they currently have on the tourist island of Henan, authorities must close down businesses and lock the population in. The growth projection for the remainder of the year has been lowered further below 4 per cent as a result, according to experts.

Earlier, on July 10, over a thousand enraged clients protested in force outside a Bank of China location in Henan, demanding recovery of their investments. Since April, four rural banks in the Chinese province of Henan have frozen millions of dollars worth of savings, endangering the livelihoods of thousands of consumers in an already fragile economy due to Covid lockdowns.

(with inputs from agencies)