Customers of rural Chinese banks whose withdrawals have been frozen will begin to get some money back Friday, regulators said, after depositors clashed with authorities at a rare protest over the weekend.

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 in the face of regulatory scrutiny into alleged mismanagement, leaving thousands of savers without funds and sparking sporadic demonstrations.

In one of the largest such rallies, hundreds gathered Sunday outside a branch of the People's Bank of China in Henan's capital Zhengzhou demanding their money.

The protests prompted a harsh official response, with demonstrators forced onto buses by police and beaten by plain clothes men, according to eyewitness accounts given to AFP and verified photos on social media.

Some depositors will now be able to get their money back, Henan's provincial banking and insurance regulator said in a statement on Monday.

Individual customers with deposits of up to 50,000 yuan ($7,442) will be repaid starting Friday, the regulator said, while arrangements for repaying others will be separately announced.

"Funds that are involved in illegal or criminal (activity) will temporarily not be repaid," the regulator said.

The announcement came a day after local police said it had arrested members of a "criminal gang" accused of taking over local banks and making illegal transfers through fictitious loans.

Protesters in a social media chat group seen by AFP were sceptical about the repayments, with one suggesting that "people with more than 50,000 yuan (in deposits) will have to continue waiting endlessly".

- Deepening crisis -

The Henan banks are among a wave of small local financial institutions hit by cash flow and management woes.

Anhui province also announced Monday that it would begin repaying the deposits of some customers of a Bengbu city bank after online complaints and local media reports of frozen withdrawals.

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

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

The Henan demonstrations -- and subsequent crackdown -- have prompted an outpouring of support, with many on the Weibo platform pointing the finger at local officials.

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

Some of Sunday's demonstrators accused officials of colluding with local banks to suppress rallies.

Provincial authorities were accused last month of abusing the country's mandatory Covid-19 health code to effectively bar protesters from public spaces.

The pass has become a ubiquitous part of life in China under Beijing's strict zero-Covid strategy, and is required to access the vast majority of buildings, shopping centres, public places and also certain public transport.

ANZ Bank analysts said on Tuesday that while the value of the funds involved in the Henan crisis was low, "the social impact of the incident could be significant if it is not handled appropriately."

"It could also trigger another round of regulatory tightening," the analysts said in a note.

China detains alleged bank fraud 'gang' after rare mass protests
Beijing (AFP) July 11, 2022 - 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 Covid-19 health code to effectively bar protesters from public spaces.

The pass has become a ubiquitous part of life in China under Beijing's strict Covid-zero strategy, and is required to access the vast majority of buildings, shopping centres, public places and also certain public transport.

Protests are relatively rare in the tightly controlled country, 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.

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