China denies ‘despicable’ banknote forgery worth US$314 billion as alleged scam goes viral

Chen Yaoming, a board director of the China Banknote Printing and Minting Corporation, turned himself in to authorities earlier this month
His detention started trending online on Wednesday amid rumours he had privately minted 2 trillion yuan (US$314 billion) of banknotes

Central banks

Frank Tangin Beijing

Published: 7:30pm, 22 Dec 2021

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China’s central bank on Wednesday denied a “despicable” rumour that a former senior official had forged 2 trillion yuan (US$314 billion) of banknotes after the allegation began trending on social media.

Chen Yaoming, a board director of the China Banknote Printing and Minting Corporation, an affiliate of the People’s Bank of China (PBOC), turned himself in to authorities earlier this month.

He is being investigated by the Central Commission for Discipline Inspection, the country’s top anti-corruption agency, under suspicion he “severely violated” ethics and laws.

While details of his charges have not been disclosed, his detention became a topic of intrigue on messaging app WeChat and microblogging platform Weibo on Wednesday, prompting the PBOC to report the speculation to police.

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Some social media users said Chen had been arrested for printing banknotes with the same serial numbers as other notes.

The online rumours were false and “despicable”, the central bank said in a statement.

“There are strict working procedures and technical standards for the printing and issuance of [the yuan],” it said.

“The People’s Bank of China has been doing it in accordance with laws and regulations.”

However, not everyone believed Chen was capable of such a ruse.

“It’s too ridiculous to be true. What a mess it would be if there’s an additional 2 trillion yuan [of money supply],” one user wrote on Twitter-like Weibo.

The largest note in China is 100 yuan, so 2 trillion yuan would be 20 billion notes, and would be worth about 2 per cent of China’s 2020 gross domestic product (GDP).

It is not the first time the PBOC has been forced to deny rumours concerning its core operations. In March 2019, it rejected claims of a reserve requirement ratio cut, and then in August that year reported online rumours about an interest-rate cut to police. A 30-year-old man was detained two months later.

Chinese authorities are on high alert to threats to economic and financial security, as growth stalls amid multiple headwinds, including widespread power shortages that have hurt industrial output, and high shipping costs and raw material prices have started to squeeze small producers.

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China’s consumer price index grew 2.3 per cent year on year in November, its highest reading since September 2020, according to the National Bureau of Statistics.

Beijing has refused an all-out stimulus, though marginal easing is already in sight, especially as GDP growth dropped to 4.9 per cent in the third quarter of the year from 18.3 per cent in the first.

The central bank lowered the one-year loan prime rate, a market benchmark, by 5 basis points on Monday and slashed the reserve requirement ratio by 50 basis points last week.

However, the PBOC has limited room to continue easing because major central banks, including the US Federal Reserve, are ready to quit monetary stimulus and raise interest rates.

Additional reporting by Bloomberg