A large number of Chinese Communist Party (CCP) officials reportedly get low-interest loans and then lend the money at high interest rates, forming a “grey channel” and accumulate wealth.
Among them, Fang Baichun, vice mayor of Fuzhou city, was the biggest earner getting 16.5 million yuan (about $2.44 million) and Xiong Hanpeng, director of the hospital affiliated with Jiangxi University of Chinese Medicine, made more than 3.9 million yuan (about $580,000).
Despite millions of dollars being involved, the top anti-graft watchdog deemed the officials’ behavior as “breaking regulations” rather than “breaking the law.”
In the CCP’s law, loan sharking itself is not a crime. Only if loan rates exceed four times the interest rates of similar bank loans, will the excess profit not be lawful.
Therefore, Officials may be punished for a misdemeanor at most in cases where they abuse their position to borrow money from a financial institution and then lend it out at a higher interest rate.
However, the suspected official would probably not be convicted of a crime, so loans for “generating money” are increasingly prevalent among middle-ranking officials.
The CCP’s Discipline Inspection Commission exposed over 20 similar cases last year. Multiple Chinese news media suggest that some officials tend to be “professional moneylenders.”
Lending with high interest rates is even more prevalent among the police force.
Where did they get the money? According to the CCP’s official anti-corruption report, some “borrowed” from their own management or service partners at low or no interest; some misappropriated public funds; and some only notify relevant departments in advance, then people who need to borrow money can “get help.”
Although borrowing money directly from Communist officials may not necessarily require collateral or a contract as strict as banks, the consequences of default are equally serious.
That is because CCP officials will “protect” all targets in the chain of interest, including criminal syndicates, which can sometimes be used to get loaned money payments from borrowers if necessary.
From the second month onwards, Su received a monthly interest payment of 7,500 yuan (about $1,111) from Shi. This is equivalent to a monthly interest rate of 2.5 percent and an annual interest rate as high as 30 percent.
But two years later, when Shi’s business faltered, she could not afford to pay the interest and was unable to return the principal.
Su did not dare to report to the police for fear that his loan method and source would be seen, so he entrusted a criminal group chief surnamed Dai to get the money from Shi.
Hardly withstanding various threats for three months, Shi returned Su’s principal in six installments. Dai was paid 160,000 yuan (about $24,000) as a payment for his efforts.
In addition, there are some officials lending money directly to criminal groups to ensure a steady stream of interest income in exchange for acting as a “Protective Umbrella” when they commit crimes.
A recent case is Zhu Honggen, vice mayor of Shangrao city, Jiangxi Province, who made a profit of 7.6 million yuan (about $1.12 million) from suspects in violent crimes as reported on a Chinese government site on August 5.
