Red continues to be the favorite color of China and Chinese companies looking for capital. I know it’s hard to believe that Chairman Xi would play favorites, but the olive branch is being offered by a new government program that offers low-interest “red loans” to firms supporting the Communist cause.
That sounds easy enough. I imagine the bar is not set too high in the Chinese manufacturing sector. Slave wages, deplorable working conditions, human rights violations, etc. would all get your foot in the door of the “red loan” program. Bonus basis points are given for carrying pictures of Chairman Mao in your wallet. Each morning workers will begin their day by saying the oath of allegiance, “East, west, north, and center, the party leads everything.”
So what kind of deal are they getting when you break it down into dollars and yuan? Zhejiang Taida Miniature Electrical Machinery Co., a maker of ventilation systems, received a 4.35 percent rate on its 3 million-yuan ($445,500) loan. Usually, it would have paid 20 percent to 30 percent more.
That adds up.
Plus, it can’t hurt to have the government on your side. According to This Week in Asia, China’s Communist Party (CCP) has nearly 90 million party members and true believers of Marxism. The CCP will allege that this is just a way to infuse the market with capital to make it more efficient. Critics differ. According to Michael Spencer, global head of economics at Deutsche Bank AG in Hong Kong, “Examples such as this will encourage weak firms to bone up on political theory in hopes of getting similar benefits.”
Xi walks a financial tight-rope in providing additional credit in a market that is already saturated. With current debt approaching three percent of GDP, it would seem absurd to take the risk of ruining credit markets at the benefit of gaining a few more comrades.
One wonders if Marx would recognize communist China today. With a quasi-capitalistic bent, income inequality is among the worst in the world, as China has created more billionaires than that of the U.S. Isn’t this the political-economic system Karl Marx and his German philosopher friend Friedrich Engels called the world to overthrow in their infamous 1848 Communist Manifesto.
Do not fret fellow travelers, Xi is leading a campaign to attach communist orthodoxies to his own dogma. Since he came to power, he has directed more resources to promote and foster Marxist doctrine and Maoist traditions. The lemmings will be celebrating Cinco de Mayo in the U.S. this week, swilling tequila and Mexican beer, in honor of, well, no one really knows, other than to honor the bars and restaurants that are glad to serve them.
If you must know, this day ranks right up there with D-Day and storming the beaches at Normandy. On May 5, 1862, the Mexican army (feared by only the French) won victory in the Battle of Pueblo over the wine-drenched French. I don’t think Cinco de Mayo is even celebrated in Mexico.
Anyway, there was a point to this. China now places a big red circle on the calendar for May 5th as well. No, it isn’t because they like tequila, as we know they favor vodka, it is because it celebrates the birth of their religious founder, Karl Marx, who by the way would be 200 now.