By Engen Tham

SHANGHAI, (Reuters) – Three Chinese banks have frozen $178 million in deposits. They offered little information about the reasons or how long they were doing so. This has left firms unable pay employees and people locked out of their savings.

All deposits were frozen by Yu Zhou Xin Min Sheng Village Bank (Shangcai Huimin Country Bank) and Zhecheng Huanghuai Community Bank on April 18. The three banks informed customers that they were updating their internal systems. According to depositors, the banks did not communicate on the matter.

None of these banks replied to Reuters emails or telephone calls asking for comment.

Although they are nominally very small, China has many local banks that have a huge impact on the country’s economy. They lend small- and medium-sized businesses so their activity is a good indicator of its health.

Due to the strict COVID-19 confinement measures that have slowed business activity, bank earnings and asset quality will likely decline. This could lead to lower economic growth in the second quarter.

Reuters received information from three depositors at the banks that showed they communicated via WeChat messaging app about how to recover funds. A few shared screenshots of the frozen accounts, and some also had conversations with staff at banks.

Some people posted videos showing protests in front of bank branches. Others claimed that they went to banks headquarters to seek an explanation, but were turned down by police.

China Banking and Insurance Regulatory Commision was cited as having said it was investigating the issue in media reports. The People’s Bank of China (the central bank) did not reply to faxed inquiries for comment.

A ANGER

Reuters received a WeChat spreadsheet from southern Zhejiang provincial depositors. It showed that they had self-reported 1.2 Billion Yuan ($177.55 Million) in frozen funds at three banks.

Caixin, a magazine that covers China reported on April 30 that the bank customers could have frozen $1.5 billion.

Jerry Chang, the owner and operator of a Hubei-based factory, is unable to access more than 6 million yuan deposited in Yu Zhou Xin Min Sheng Village Bank.

Chang stated that “not being able to draw money has a tremendous impact on the operation our factory including procurement, workers’ wages, and worker salaries.” Chang used the bank because it had a marginally higher interest rate at 1.85%.

Tony Qian from Zhejiang, an investment advisor, can’t access the 20,000,000 yuan he deposited in Yu Zhou Xin Min Sheng Village Bank. He had been saving for property purchases and Tony Qian couldn’t get to it.

Qian stated, “The only thing that makes me angry is that… no one has given us any explanations.”