The Enping financial crisis occurred in

Enping Enping, alternately romanized as Yanping, is a county-level city in Guangdong province, China, administered as part of the prefecture-level city of Jiangmen. Enping administers an area of and had an estimated population of 483,907 in 2020 ...

Jiangmen Jiangmen ( zh, c=江门), postal map romanization, alternately romanization of Chinese, romanized in Cantonese as Kongmoon, is a prefecture-level city in Guangdong provinces of China, Province in southern China. It consists of three urban distri ...

Guangdong ) means "wide" or "vast", and has been associated with the region since the creation of Guang Prefecture in AD 226. The name "''Guang''" ultimately came from Guangxin ( zh, labels=no, first=t, t= , s=广信), an outpost established in Han dynasty ...

China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

. This financial crisis refers to the localized financial risk events in Enping in the 1990s. At the height of the situation, there were two serious

bank run A bank run or run on the bank occurs when many Client (business), clients withdraw their money from a bank, because they believe Bank failure, the bank may fail in the near future. In other words, it is when, in a fractional-reserve banking sys ...

s in June 1995 and August 1996, which at one time led to financial paralysis in the entire province of Guangdong.

Backstories

In the early stage of

Chinese economic reform Reform and opening-up ( zh, s=改革开放, p=Gǎigé kāifàng), also known as the Chinese economic reform or Chinese economic miracle, refers to a variety of economic reforms termed socialism with Chinese characteristics and socialist marke ...

, Guangdong Province, as the frontier of opening up, had once experienced rapid economic development. The State Council introduced many preferential policies for Guangdong's economic development, but this also led to the unorganized development of finance in Guangdong, and a large number of debt crises and financial incidents began to appear.In 1990s, Guangdong Province experienced problems of economic overheating and bubble expansion.The high-speed flow of capital was accompanied by the phenomenon of a large number of loans being repaid by borrowing, meanwhile the incidence of financial crimes had also increased. Beginning in 1992, mainland China began to be keen on building development zones, investing in real estate, investing in stocks and capital-raising, and, in terms of economic indicators, was keen on raising fixed-asset investment, increasing credit investment, increasing currency issuance and stimulating inflation, while the phenomena of indiscriminate capital-raising, indiscriminate borrowing and indiscriminate establishment of financial institutions appeared in the economic order.

Fraud

Local officials, as well as the bank managers at the local

China Construction Bank The China Construction Bank Corporation (CCB) is a Chinese partially state-owned Multinational corporation, multinational banking and financial services corporation headquartered in Beijing, Beijing, China. It is one of the "Big four banks, big ...

(CCB) branch, had illegally allocated funds to their own projects. Other banks involved included the other three of the " big four" Chinese banks: the

Bank of China The Bank of China (BOC; ; Portuguese language, Portuguese: ''Banco da China'') is a state-owned Chinese Multinational corporation, multinational banking and financial services corporation headquartered in Beijing, Beijing, China. It is one of ...

, the

Industrial and Commercial Bank of China The Industrial and Commercial Bank of China (ICBC; zh, 中国工商银行) is a Chinese partially state-owned multinational banking and financial services corporation headquartered in Beijing, China. It is the largest of the " big four" banks ...

, and the

Agricultural Bank of China The Agricultural Bank of China (ABC), also known as AgBank, is a Chinese partially state-owned multinational banking and financial services corporation headquartered in Beijing, China. It is one of the " big four" banks in China, and the second ...

. The banks lost ( (US$509m) and (around US$0.5m)) due to the fraud, with the CCB branch alone estimated to have lost US$480m.

Aftermath

Losses incurred by the scandal cost the

People's Bank of China The People's Bank of China (officially PBC and unofficially PBOC) is the central bank of the People's Republic of China. It is responsible for carrying out monetary policy as determined by the ''PRC People's Bank Law'' and the ''PRC Commercia ...

(PBOC) RMB 6.8b. As banks pulled out of Enping, residents were denied access to financial services into the early 2010s.

References

{{reflist Enping Jiangmen Guangdong Financial crises