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China economy

Need a personal loan? Sure, if you’re a Communist Party member

Small Chinese bank offers special product just for cadres, who can borrow up to 100,000 yuan to finance businesses, buy cars, decorate their homes or travel

PUBLISHED : Tuesday, 12 June, 2018, 9:34pm
UPDATED : Tuesday, 12 June, 2018, 11:45pm

A small bank in eastern China has introduced a special product for local Communist Party members – a personal loan of up to 50,000 yuan (US$7,800) as a standard offering, while “outstanding” members can borrow up to 100,000 yuan (US$15,600).

The “honesty loan” was recently launched by the Lanshan Rural Commercial Bank in eastern Shandong province, targeting local party members seeking funds to finance private businesses, car purchases, home building and decoration, travel or education, according to a document seen by the South China Morning Post and confirmed with the bank.

Members of the ruling Communist Party – seen as the “vanguard of the working class” – already receive preferential treatment when they apply for jobs in state companies or for government positions, but extending this to personal finance is controversial.

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The party sees cadres as more capable and honest than non-members, and a number of financial institutions in rural China already offer them exclusive services – but those loans are mainly for business purposes rather than personal spending.

Individual party members can get a loan of up to 100,000 yuan from Yunnan Rural Credit Cooperatives, for example, to be used for farming businesses and paid back over a maximum of three years, according to its website. Cadres must be recommended by their local party branch to qualify.

In eastern Zhejiang province, Deqing Rural Commercial Bank also offers party members up to 100,000 yuan to start a family business, with the loan to be repaid within a year, its website says.

But the Lanshan Rural Commercial Bank has taken this a step further with its personal loans for cadres – an idea that is not in full harmony with the dogma of the party, which requires its nearly 90 million members to “be the first to suffer hardships and the last to enjoy ease and comfort”.

Applicants for the new loans must present their membership cards and a certificate from their party branch showing they have not been subject to any disciplinary measures within the last five years, along with other personal documents such as marriage certificates.

Their salary, ability to make repayments and intended use of the loan will also be taken into consideration when the bank decides whether to extend a loan and how much it will lend. Members who are considered to be “outstanding” by their party branch, meaning they have a good reputation and can repay the loan quickly, will be eligible to borrow the maximum amount.

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The loans will be subject to an annual interest rate of 6 per cent, so a cadre would pay 3,000 yuan in interest on a one-year 50,000 yuan loan, a clerk from the bank told the Post.

That interest rate is about 40 per cent higher than China’s benchmark one-year lending rate of 4.35 per cent set by the People’s Bank of China, which has remained unchanged since October 2015. Financial institutions can set their own interest rates for loans based on the benchmark rate.

The clerk would not say why the product was reserved exclusively for party members.

The bank opened in 2014 and has 20 branches in the district of Lanshan, which has a population of about 400,000 people and is known for its production of green tea.

With total assets of 500 million yuan, the bank is one of the smallest in China. Last year, it was fined 500,000 yuan by the provincial banking regulator for making changes to its shareholder structure – involving those with stakes of more than 5 per cent – without approval.