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Online rumors spark runs on smaller Chinese banks

Protracted economic slump outside big cities puts older depositors on edge

About 13% of China's banks could face liquidity problems if economic growth falls further, according to the central bank.   © Reuters

YINGKOU, China -- Anxiety over China's economy outside of its megacities appears to be boiling over after online rumors triggered two bank runs just days apart, a trend that sheds light on the increasingly tough business environments faced by the country's smaller local lenders.

A massive crowd gathered outside a Yingkou Coastal Bank branch on Nov. 6, the sheer size of the line caught the attention of a man who gave his family name as Shi on his way home from work. When he arrived at his home in Yingkou, a port city in Liaoning province, his wife told him that she had read on the internet that the bank was in trouble. The rumors were based on a local newspaper report that a major shareholder in the bank was facing financial difficulties.

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