China Gives Cheap Loans for Studying Xi's Thought

(Bloomberg) -- A new method for small business owners to gain the favor of bank managers and obtain credit is emerging amid China’s push to support the real economy: Studying Xi Jinping thought and promoting the Communist Party.

Zhejiang Taida Miniature Electrical Machinery Co., a producer of ventilating fans, this year received a so-called “red impetus loan” of 3 million yuan ($447,000), said chairman Qiu Rongquan at the company’s booth at the bi-annual Canton Fair, billed as the world’s largest trade forum. The loans are granted to companies that have solid businesses after doing good work promoting the Communist Party, he explained.

Huzhou city government, which oversees Deqing county where the company is based, said in an April 11 statement that the loans are guarantee and collateral free, with reduced interest rates to help private companies develop. Qiu said his company received the loan at the benchmark interest rate, whereas it would usually pay 20 to 30 percent above the rate. 

China’s government has ramped up support for the economy in recent months, bringing forward spending and trying to channel cheap credit to private businesses. That’s helped stabilize economic growth and underpin sentiment that has been slugged by uncertainty stemming from the trade war with the U.S.

While the private-enterprise-focused stimulus is a departure from past policies that typically revved up investment and state-owned firms, the "red impetus loans" underscore the fact that the government and party remain active players in steering credit.

Study Xi

Qiu said he began improving his company’s work promoting the party about four to five years ago and now it has 12 party members out of its 170 employees. He encourages employees to use “Xue-Xi-Qiang-Guo,” or “Study Xi to Strengthen the Country,” an app that promotes President Xi’s ruling doctrines, he said.

“The party building work has paid off,” said Qiu. “We have got the government support. It means a lot.”

The “red impetus loan” may help with Qiu’s plan to invest 5 million yuan this year on research and development, upgrading machinery and attracting talent. He’s striving to close the quality gap on his major competitors in Germany and Taiwan and aims to increase the company’s share of the global market from about 10 percent now to 30 percent at some point in future, Qiu said.

To contact Bloomberg News staff for this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net;Xiaoqing Pi in Beijing at xpi1@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jeffrey Black

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With assistance from Bloomberg