Chinese authorities take advantage of a “grey channel” of loan sharking

News analysis

A large number of Chinese Communist Party (CCP) officials reportedly obtained low-interest loans and then lent money at high interest rates, forming a “gray channel” and accumulating wealth.

According to the website of the Central Commission for Discipline Inspection, on August 5, in Jiangxi Province, seven officials made extraordinary profits from high interest on “money lent.”

Among them, Fang Baichun, vice mayor of Fuzhou City, was the biggest earner with 16.5 million yuan (about 2.44 million U.S. dollars) and Xiong Hanpeng, director of the University Affiliated Hospital. of Chinese medicine from Jiangxi, won more than 3.9 million yuan (about 580,000 dollars). ).

Despite millions of dollars involved, the top anti-corruption watchdog called the officials’ behavior a “violation of regulations” rather than “a violation of the law.”

Under CCP law, loan sharking itself is not a crime. Only if the loan rates exceed four times the interest rates of similar bank loans will the excess profit not be lawful.

Therefore, officials can be punished for an offense at most in cases where they abuse their position to borrow money from a financial institution and then lend it out at a higher rate of interest.

However, the suspected official would likely not be convicted of a crime, so loans to “generate money” are increasingly common among mid-level officials.

The CCP Discipline Inspection Commission exposed more than 20 similar cases last year. Several Chinese media outlets suggest that some officials tend to be “professional lenders“.

High-interest loans are even more common among police forces.

In a 2021 nationwide survey of political and legal forces, the CCP’s top discipline inspector acknowledged 8,251 cases of police participating in attrition.

Where did they find the money? According to the CCP’s official anti-corruption report, some have “borrowed” from their own leadership or service partners with little or no interest; certain embezzled public funds; and some only inform the relevant departments in advance, so people who need to borrow money can ‘get help’.

In short, officials use public rights and benefits in exchange for loans, says the report.

Although borrowing money directly from communist officials does not necessarily require a guarantee or contract as strict as the banks, the consequences of defaulting on payment are just as serious.

In effect, CCP officials will “shield” all targets in the chain of interest, including criminal syndicates, which can sometimes be used to extract payments of loaned money from borrowers if needed.

A case cited by the Central Commission for Discipline Inspection on December 5, 2021 showed that Su Hao, deputy director of the Wenshan Bureau of Statistics in southwest China’s Yunnan Province, gave a loan to high interest rate of 300,000 yuan (about 44,000 dollars). to the owner of a wine company named Shi in October 2013.

From the second month, Su received a monthly interest payment of 7,500 yuan (about $1,111) from Shi. This equates to a monthly interest rate of 2.5% and an annual interest rate as high as 30%.

But two years later, when Shi’s business collapsed, she couldn’t afford to pay the interest and was unable to repay the principal.

Su didn’t dare to report to the police for fear that his method and loan source would be seen, so he assigned a crime group leader named Dai to get Shi’s money.

Barely resisting various threats for three months, Shi returned Su’s principal in six installments. Dai received 160,000 yuan (about $24,000) as a reward for his efforts.

Additionally, some officials lend money directly to criminal groups to ensure a steady flow of interest income in exchange for acting as a “protective umbrella” when they commit crimes.

A recent case is that of Zhu Honggen, Vice Mayor of Shangrao City, Jiangxi Province, who made a profit of 7.6 million yuan (about $1.12 million) from violent crime suspects. , as reported by a Chinese government website on August 5.


Shawn Lin is a Chinese expat living in New Zealand. He has contributed to The Epoch Times since 2009, with a focus on China-related topics.

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