China’s Local Governments Resort to Heavy Fines Amid Financial Strain
Amidst China’s faltering economy, local governments find themselves in dire financial straits. This predicament has driven them to adopt increasingly imaginative, albeit often unreasonable, tactics to generate revenue, putting a significant strain on both citizens and businesses.
In an effort to fill their coffers, local authorities have resorted to arbitrary revenue-raising measures, such as imposing hefty fines for minor offenses. In some extreme cases, they have engaged in cross-provincial confiscation of private enterprise assets—a practice colloquially referred to as ‘long-distance fishing’. This involves dispatching law enforcement officers to other regions to seize business assets, with a particular focus on targeting private companies in economically thriving provinces.
Take, for instance, the plight of an elderly woman in Shaanxi who faced a staggering fine of 60,000 yuan for merely selling 5 kg of celery. Meanwhile, in Daxing district in Beijing, a distributor who purchased potatoes at 1.2 yuan per kilogram and sold them at 2 yuan found themselves slapped with a hefty 300,000 yuan fine for breaching price regulations. In Guangxi, a farmer who raised and slaughtered a pig, then sold the meat to his relatives for 2,000 yuan, incurred a penalty of 100,000 yuan. In Sichuan province, a farmer who constructed a road at his own expense to aid in farming was fined a significant 40,000 yuan.
Official reports from China indicate that national tax revenue dropped by 3.4% last year. Conversely, non-tax revenue witnessed a substantial increase of 25.4%, driven by a nearly 15% rise in income from fines and confiscations. These fines and confiscations encompass both penalties and assets that have been seized.
For over twenty years, local governments in China have depended on land finance, selling land use rights to real estate developers since all land is state-owned. However, with the real estate market in a prolonged slump, land sales have nosedived, causing severe financial shortages for local authorities. Consequently, many have turned to levying fines and confiscations as alternative revenue sources.
In Fuzhou, Fujian, an elderly man earned just 14 yuan by selling celery labelled substandard by officials. The market regulation department fined him 50,000 yuan. When he couldn’t pay on time, an additional 50,000 yuan penalty was slapped on him.
On February 5th, a restaurant owner in Heilongjiang province shared a video recounting an unsettling visit from three individuals claiming to represent the Environmental Protection Department. They insisted that he must install a smoke purifier or face fines between 5,000 and 50,000 yuan. The officials reportedly cautioned that without the purifier, the restaurant’s emissions would harm the nation’s blue skies.
The restaurant owner, who has been running his small business for over a decade, explained that he typically serves only two to three customers daily, with each spending about 8 to 10 yuan. Specializing in Korean-style dishes that produce minimal smoke, he found the demand for a purifier unnecessary. This incident ignited fervent online debates, with many pointing out the susceptibility to manipulation in fines ranging from 5,000 to 50,000 yuan, and highlighting that numerous small eateries don’t even earn 50,000 yuan in net profit annually.
Last November, during the hectic harvest season, a farmer found himself out of diesel for his tractor and harvester. Using his pickup truck, he headed to a nearby gas station and purchased over 100 liters of diesel, intending to refuel his farm machinery. Unfortunately, on his way back, transportation enforcement officers pulled him over and slapped him with a 30,000 yuan fine for transporting hazardous materials without a permit. The hefty fine sparked public outrage, prompting authorities to reconsider. Given it was his first offense and no serious harm resulted, they ultimately decided to refund the fine.
Amid escalating financial challenges, many local governments in China have resorted to “long-distance fishing,” where public security and judicial departments target businesses beyond their own jurisdictions. One such example is Yinjian King Group in Guangdong, which found itself in the crosshairs in 2022. The company, which had generated 2.423 billion yuan in revenue and was preparing for an IPO in Hong Kong by mid-2023, faced severe accusations.
In October 2023, public security bureaus from Hunan Province accused Yinjian King Group of fraud and sent over 1,600 police officers to Guangdong to raid its subsidiaries. Despite the total amount involved being just over 600,000 yuan, the Hunan investigators froze 64 related accounts of Yinjian King Group. As a result, the company was compelled to withdraw its IPO application in Hong Kong due to financial constraints, leading to the collapse of its business operations, which have yet to resume.
This cross-regional law enforcement doesn’t just target private companies; it also heavily affects individuals involved in online buying and selling. Whether selling personal used items or buying second-hand luxury goods like designer bags or watches, people face significant risks of being scammed or heavily fined.
