If a U.S. broker goes bust, the Treasury bills in held by an individual still exist; the federal government—not the broker—owes the money.
That safety net is missing in China.
So when Jingwei Treasury Bond Service—a nearly 30-year-old, city-owned brokerage in Xi’an—stopped redeeming what locals believed were treasury bonds, the stamped receipts held by more than 6,000 investors suddenly became scraps of paper.
For months, many of those investors have gathered outside the city hall of Xi’an, the capital of Shaanxi Province, seeking to recover their investments, to no avail.
The case lays bare a nationwide problem tied to local government financing vehicles—shell companies that China’s provinces and cities use to borrow money off the books.
The city government set up Jingwei Treasury Bond Service to raise local funds. For years, they sold bonds and took bank loans to fund roads, subways, and industrial parks, betting that land sale revenue and a booming property market would cover the bill.
Its default in March threatens to wipe out more than 10 billion yuan (about $1.4 billion) that families had saved for retirement, medical bills, and their grandchildren’s schooling, local investors say.
As real estate sales and tax receipts slump, local government financing vehicles are struggling to roll over what analysts estimate is about 78 trillion yuan (roughly $10 trillion) in liabilities—more than half the size of China’s entire economy.
Each quarter, at least 1 trillion yuan (about $137 billion) in local government financing vehicle bonds come due, forcing a nonstop scramble for fresh cash.
Beijing has launched a one-off 10 trillion yuan (about $1.4 trillion) debt-swap program that lets provinces convert some of this “hidden” borrowing into longer dated, state-backed bonds, but that covers only a fraction of what’s outstanding and merely pushes repayment further into the future.
The uproar in Xi’an is occurring as Chinese savers are still shaken by the 2022 rural-bank freezes in Henan and the near liquidation of Zhongrong Trust last month.
The Jingwei Bond Office
Documents reviewed by The Epoch Times show Jingwei is run by Xi’an Industrial Investment Group Co., a wholly state-owned firm set up by Xi’an’s municipal and city governments.It opened in 1996 with licenses from the Xi’an Finance Bureau, the Shaanxi Provincial Finance Department, and China’s Ministry of Finance.
When the province ordered a purge of bond brokerages in December 1999, 13 of the city’s 14 outlets were closed. Jingwei alone stayed open—with the same address, signage, staff, receipts, and phone numbers—under the Beilin District Finance Bureau’s supervision.
For nearly three decades, it sold what looked like plain treasury bonds, never missing a payout except for a brief liquidity scare in 2003 that officials fixed within six weeks.
Suddenly, the Money Stops
On March 24, Jingwei failed to redeem maturing bonds, according to local investors. A week later, local police sealed the offices and announced a criminal probe. Victims filing reports were told to scan a police QR code—and soon discovered their phones were tracked.“If we so much as talk about petitioning in Beijing, we get a call [from the police] right away,” Li said.
By May 10, 300 to 400 investors were gathering outside Xi’an’s city hall daily, according to Li.
Videos posted on Chinese social media show banners demanding repayment and uniformed officers hemming in protesters.
Li said several petitioners spent a week in detention, while a lawyer who tried to represent them was jailed, went on hunger strike, and was released after five days.
Local investors told The Epoch Times that roughly 6,000 to 7,000 people—most in their 60s to 80s—bought more than 10 billion yuan (about $1.4 billion) of bonds at Jingwei over the past decades, often pooling generational savings.
One former villager sold five apartments given as redevelopment compensation and placed all the proceeds in what she thought were rock solid bonds. A migrant worker who had sold her farmland and saved factory wages sobbed at a rally and threatened to jump into Xi’an’s moat.
A 90-year-old who had amassed 190,000 yuan (about $26,000) from collecting bottles now begs outside the petition booth; officials once gave him 200 yuan (about $27) to move along.
Silence From City Hall
Xi’an officials set up a makeshift petition desk in a local hotel courtyard, where clerks—one a recently retired army officer, according to Li—repeat the same script: “Go home and wait; the police are handling it.”When The Epoch Times called the Beilin District Finance Bureau, the government agency that oversees Jingwei’s bond-issuing outlets, staff denied knowledge, referred inquiries to the petition desk, and refused to name anyone in charge.
Nearly two months after the default, authorities have announced no findings and offered no repayment plan, according to Li.
“Every bond slip we hold bears a government seal. We trusted that. Now they have to honor it,” Li said, adding that the daily protests will continue.
Last year, Sichuan Trust offered deep discount repayments to more than 8,000 elderly investors after it faced a debt shortfall of up to 30 billion yuan (about $4.16 billion).
In April, regulators moved to liquidate Zhongrong International Trust, once the custodian of $108 billion in high yield products.
Economists tie the failures to local government financing vehicles that owe a combined $78 trillion yuan ($10–11 trillion)—more than half of China’s GDP—that Beijing is now moving to refinance with ultra-long sovereign bonds.
Because investors long assumed Beijing would never let local government financing vehicles fail, any default risks cause public trust issues in the wider financial system.
