Regulating Effects of the Chinese Interest Forms on Profit

Yanan Wang ()
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Yanan Wang: Xiamen University

Chapter Chapter 16 in The Basic Theory of Chinese Economy, 2026, pp 111-115 from Springer

Abstract: Abstract This section examines how China’s differentiated interest forms regulate the formation of profit, focusing primarily on industrial profit. It first clarifies, in a modern division of labor, that the net return of an industrial capitalist is necessarily distributed into industrial profit, commercial profit, and the interest of interest-bearing capital; when interest claims encroach upon the normal or average profit, industrial operation becomes unsustainable. It then argues that the historical growth of Chinese industrial profit has been constrained by the country’s segmented interest structure. In rural areas, extremely high usury rates (often cited as 24–300%) are largely tied to livelihood borrowing under precarious conditions, leaving little room for profit in the capitalist sense. In urban finance, rates are lower (roughly 9–20%) but remain high relative to foreign benchmarks, while foreign banks operate on a distinct low-rate standard (about 4–8%) and can channel cheap funds to their own enterprises yet charge higher rates to comparable Chinese borrowers. The coexistence of these benchmarks, together with limited capital mobility and unequal institutional advantages, prevents normal equalization of interest rates and diverts capital toward commerce and finance. As a result, “normal” Chinese industrial profit is repeatedly squeezed—simultaneously by high usury at one end and low foreign-bank rates coupled with privileges at the other—while foreign-invested industry secures profit and even excess profit.

Date: 2026
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DOI: 10.1007/978-981-95-6330-2_16

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