Tuesday, March 2, 2021

Perks, Chinese Style—Communist Party Membership and Access to Cheap Loans: Varieties of Party Membership-based Loan Program

Related, see: Orwell, George, Animal Farm: "All animals are equal but some animals are more equal than others."

And, as noted in the introduction to "“A Communist Doesn’t Whine — He Shows His Teeth” Communists In Weimar Germany": 

One of the rules of politics is "if your country goes communist you want to be as far up the apparatchik totem pole as you can get."
Preferably a commissar or above, putting you and yours closer to the commissary.

From the Center for Advanced China Research,

During the Politburo’s 40th Collective Study Session in April 2017, President Xi delivered a speech on strengthening the Party’s leadership over financial affairs, particularly over the financial mechanisms used to stimulate economic growth. In response to President Xi’s call to action, local party committees across China have launched a variety of party membership-based loan programs. These programs give qualified party members and private businesses easy access to designated pools of often collateral-free capital at exceptionally low-interest rates, thus making party membership an important indicator of creditworthiness.

The proliferation of various party membership-based loan programs reveals that local party committees are utilizing financial instruments not only to stimulate economic growth, but also to solidify party control over financial affairs. This allows the CCP to enhance its relevance and appeal to Chinese people in a most practical way—access to low-cost capital. Programs such as these provide additional evidence that the Party plays a central role in selecting which individuals and companies can be granted access to low-cost capital.

Most of these party membership-based loan programs are launched as a partnership between local party committees and rural commercial banks (农商银行) or rural credit cooperatives (农村信用社). My Internet-based survey found that since 2017, such programs have been launched in more than 40 Chinese cities and counties across at least 13 provinces or provincial-level administrative regions, including but not limited to Fujian, Gansu, Hubei, Jiangsu, Liaoning, Guizhou, Guangdong, Guangxi, Qinghai, Shandong, Shanxi, Yunnan, and Zhejiang.[1] Local party committees hope that these programs will support the entrepreneurship of party members, provide seed capital for their business plans, or finance rural party members’ agricultural production. Existing programs can be divided into two major categories: “Rural Party Member Entrepreneurship Loans” and the “Party Building Plus” model. The primary difference between these two categories is that the second category is conditioned upon advancement within the Party and party building efforts.

“Rural Party Member Entrepreneurship Loans” (农村党员创业贷款)

This type of loan program has existed under various names since Reform and Opening Up. The idea behind this type of loan is to reduce poverty in rural China by encouraging and incentivizing the entrepreneurship of party members. These loans are typically provided as small and micro loans to provide liquidity and meet cash flow needs. For instance, in Fuding County, Fujian Province (福建省福鼎市), the average loan size is approximately RMB 70,000-80,000 (approximately USD 9,800-11,250) with 3-year maturity and interest of 0.675% (approximately 0.224% annual rate), considerably below the prime lending rate of 4.35%. This model has been practiced by many counties and villages in a number of provinces. The most reported cases are found in Yunnan Province, Guangdong Province, and Zhejiang Province....

....MUCH MORE