San Francisco Frontiers - China banks to repay more customers after protests

China's rural banking sector has been hit hard by Beijing's efforts to rein in a property bubble and spiralling debt, in a financial crackdown that has had ripple effects across the world's second-largest economy.

Four banks in Henan province froze cash withdrawals in mid-April as regulators cracked down on mismanagement, locking hundreds of thousands of customers out from their funds and sparking sporadic protests.

The provincial banking regulator in mid-July said individual customers with deposits of up to 50,000 yuan ($7,341) would get their money back, after one of the largest protests erupted into violence.

Regulators have since been gradually offering repayments to more customers with deposits of higher value.

On Friday, the Henan banking and insurance regulator promised to repay those who had deposited between 350,000 to 400,000 yuan ($51,300 to $58,600), saying in a statement that this group would begin receiving it on August 22.

The statement added that "repayments of (deposit amounts) under 350,000 will continue to be paid", suggesting that not all customers with smaller bank balances had received their money yet.

Authorities have named the four banks as well as another rural bank in nearby Anhui province as involved in a scheme to defraud investors, and launched a police investigation.

The Henan banking scandal has dealt an unprecedented blow to public confidence in China's financial system owing to the size and scale of the fraud, analysts say, with the banks involved allegedly operating illegally for more than a decade.

Chinese authorities are desperate to avoid disruptions to social stability just months away from a major congress of the ruling Communist Party.

A July 10 mass demonstration in Henan's provincial capital Zhengzhou was violently quashed, with demonstrators forced onto buses by police and beaten, according to eyewitness accounts given to AFP and verified photos on social media.

A.Smith--SFF