By Jing Xuan TENG

Members of a “criminal gang” accused of taking control of local banks have been arrested in central China after rare protests over alleged financial corruption sparked violent clashes between customers and authorities.

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.

The slowdown forced four banks in Henan province to freeze all cash withdrawals since mid-April, leaving thousands of small savers without funds and sparking sporadic demonstrations.

In one of the largest such rallies yet, hundreds gathered Sunday outside a branch of the People’s Bank of China in Henan’s capital Zhengzhou demanding their money, according to multiple witnesses who declined to be named.

Protesters held banners accusing local officials and police of corruption, calling on the central government to “give severe punishment” to those responsible, video footage verified by AFP showed.

Footage of Sunday’s rally showed protesters throwing objects, while one participant told AFP that demonstrators were hit and injured by unidentified men.

Another video verified by AFP showed a man with a swollen eye saying he had been beaten by “gangsters” and dragged onto a bus by police.

Some demonstrators accused officials of colluding with local banks to suppress rallies, and provincial authorities were suspected last month of abusing the country’s mandatory health code to effectively bar protesters from public spaces.

Protests are relatively rare in tightly controlled China, where authorities enforce social stability at all cost and where opposition is swiftly repressed.

But desperate citizens have occasionally succeeded in organising mass gatherings, usually when their targets are local governments or individual corporations.

– Deepening crisis –

Local authorities did not immediately comment on the unrest, but police in neighbouring Xuchang city said they had arrested members of an alleged “criminal gang” for their suspected involvement in a scheme to gain control of local banks.

The gang made illegal transfers through fictitious loans and used their shareholdings — as well as “manipulation of executives” — to effectively take over several local banks starting in 2011, police said late Sunday.

Henan province’s banking and insurance regulator also said it was “accelerating” plans to tackle the local financial crisis and “protect the legal rights and interests of the broader public”.

But analysts expect the economic crisis to deepen and the fallout from last year’s collapse of property giant Evergrande to continue.

The issues “appear to be the tip of the iceberg of serious systemic and financial risks with small- and medium-sized banks in China,” a report by risk consultancy SinoInsider found last week.

“Other small- and medium-sized banks could soon be found to be facing similar problems, particularly as financial contagion from Evergrande’s debt crisis spreads further and the Chinese economy markedly deteriorates,” it added.

– ‘Why are you treating people like this?’ –

The demonstrators in Henan largely drew sympathy on Chinese social media on Monday, with many on the Weibo platform pointing the finger at local officials.

“Why are you treating ordinary people like this?” one Weibo user asked in a post on Monday.

“Please strictly investigate the Henan government.”

Online discourse surrounding the protest remained tightly controlled, however, with Weibo disabling the hashtag for “the incident of Zhengzhou police hitting the public”, which some people posting about Sunday’s violent clashes had used.

Meanwhile, a report that said protesters had been beaten at the Zhengzhou protest was removed from the English-language website of state-backed outlet Sixth Tone just hours after it was published.

tjx/oho/mtp

© Agence France-Presse