China detained hundreds of individuals accused of bank fraud in China. In an effort to preserve social stability before the two-decade Communist Party Congress, China began repaying more victims of the $5.8 Billion scandal.
According to a Monday statement, 234 suspects were arrested by police in Xuchang in Henan province. They made “significant progress in recovering the stolen funds,” according to a late Monday statement. According to police, a criminal gang headed by Lv Yi illegally controlled four rural banks including Yuzhou Xinminsheng Village Bank. They offered rates as high at 18% in order to attract funds estimated to be 40 billion yuan ($5.8 trillion).
Local authorities stated that they were repaying more victims in addition to the 18 billion yuan distributed as of mid-August. The authorities announced that investors who have made deposits between 400,000 and 500,000 yuan would be reimbursed starting Tuesday morning. Investors who have suffered more losses will receive an initial amount of 500,000 Yuan, with the rest reserved for later.
After being denied access to their savings and investments at rural banks, hundreds of protestors marched through Henan in the spring. This scam caused the greatest damage to China’s $52 billion banking system. It began when the government took control of an Inner Mongolia lender.
The Communist Party will be holding its 20th Congress later in the year. President Xi Jinping is expected to secure an unprecedented third term. As slowing economic growth and Covid lockdowns, as well as a rumbling real estate crisis, are causing hardships for large swathes of the country, social stability is being prioritized ahead of the meeting. At a Politburo meeting held in July, regulators were asked to ensure stability in financial markets and crack down on financial crime.
Although village banks are not allowed to accept deposits from outside their area, the fraudsters marketed their funds online through third-party platforms. This made it a national problem.
China has struggled for years to fix its rural banking system problems. It is home to some 3,800 lenders, which have the lowest capital against risky assets and are among the most financially stable countries in the world. Beijing raised 64.6 billion Yuan in the first round for a stability fund to bail out financial institutions that are struggling.
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