Panic and fear gripped people in China as the Communist Party of China imposed stringent restrictions on cash withdrawals from bank in the wake of rising non-performing assets (loans that turn unproductive). Even as the restrictions were put in place only in the country’s Hebei province as a pilot project, the move has sent panic waves across.

News agency Xinhua reported that while the restrictions will soon be put in place in Hebei, the experiment will start in Zhejiang province and the city of Shenzhen in October as per a plan chalked out by the People's Bank of China.

The news agency further said that cash transactions of 500,000 yuan (about $70,600 dollars) or above will be regulated for business accounts while for personal accounts, the limits have been set at 100,000 yuan, 300,000 yuan and 200,000 yuan, in Hebei, Zhejiang and Shenzhen respectively.

The news agency said that the move to regulate large amount of withdrawals was aimed at strengthening cash circulation management and address illegal activities.

Reports suggested that about 7 million people in the three provinces will be affected by the move.

The People's Bank of China said the move will keep the "unreasonable demands of large amounts of cash" in check, while regulators will ensure the people's normal needs for large transactions is also taken care of, the news agency reported.

Cash withdrawals for individuals and businesses over the threshold would require the government’s nod.

China has been recklessly lending to various countries in Asia and Africa, primarily under its ambitious belt and road initiative (BRI). The loans have been given bilaterally as well as though the state-owned enterprises and banks.

According to Strait Times more than 13 per cent of 4,379 lenders were considered “high risk” by the country's central bank.

“Banks are also facing challenges from government efforts to boost growth and help struggling small businesses, which threaten to squeeze lending margins and lead to a pileup of bad debt,” a Strait Times report said.

https://www.straitstimes.com/business/banking/over-13-of-chinas-banks-are-highly-risky-central-bank-says

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