Chinese banks risk becoming entangled in the fallout from a liquidity freeze at an exchange for rare metals that has also been providing high interest rate investment products through bank branches across the country.
Against a backdrop of renewed turmoil in the Chinese equity markets, there have been protests in the past two weeks in both Kunming and Shanghai as investors in the financial products sold by the Fanya Metal Exchange demand their money back. It emerges that some have already started taking their protests to the banks that distributed the products.
Fanya is a forum for trading minor metals like indium and bismuth that has also functioned as a shadow banking conduit — not only leveraging metal deposited with the exchange as collateral for loans, but offering high interest investment products to retail investors.