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China braces for a wave of financial distress

Baoshang’s failure in August marked the first collapse of a Chinese bank in 22 years. As bank runs rise, trust firms run into trouble and more struggling lenders are merged, experts are asking: how bad is China’s financial crisis?

Illustration: Andrew Archer

The eye is drawn to the failure of Baoshang Bank and for good reason. Beijing’s decision to let the regional commercial lender from Inner Mongolia file for bankruptcy in early August marked the first default by a Chinese lender since Hainan Development Bank ran out of money and was shuttered in 1998.

Baoshang’s collapse was extraordinary on so many levels. It was 89% owned by a private conglomerate called Tomorrow Group – unusual in itself, given that almost every Chinese bank is state run. Tomorrow’s founder Xiao Jianhua hasn’t been seen in public since he vanished from Hong Kong’s luxury Four Seasons hotel in 2017, shortly after midnight on Chinese New Year.


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