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As China’s Finances Worsen, Thug-like Local Governments Impose a ‘Fines Economy’

Published: August 14, 2023
Police and traffic police stand outside the Canadian embassy in Beijing on May 9, 2023. In China local governments have resorted to fining citizens sometimes exorbitant fees in order to fill local coffers hit hard by dismal economic activity. (Image: GREG BAKER/AFP via Getty Images)

As China’s real estate, manufacturing, service, and consumer sectors shrink, local government tax revenues are plummeting, making China’s land finance model unsustainable. As a result, a “fines economy” has emerged in many areas across the vast country.

Following the end of the pandemic, China’s various indicators of economic growth have all been declining, putting severe pressure on local government coffers. Cash-strapped local governments have resorted to fining citizens — sometimes exorbitant amounts for minor infractions — in a bid to address the cash flow problem. 

In Shanghai for example, a number of restaurants were fined upwards of 5,000 yuan, or nearly US$700.00, for serving rice noodles topped with shredded cucumber. Authorities said the fines were due to the restaurants “failing to obtain a license for the preparation and sale of cold food.”

In another case, a vegetable seller was fined 66,000 yuan, or US$9,100, by the market supervision department after selling just five pounds of celery. The fine was imposed because the seller couldn’t provide a purchase receipt revealing the source of the produce. 

One peasant, who set up a stall selling solutions for foot fungus, was hit with a fine of 1.96 million yuan, or US$270,000 on the grounds that he didn’t register his medicines on file and didn’t have a certificate of eligibility to practice medicine.  


Traffic police the worst offenders

China’s fines economy is driven in large part by its traffic police, whom many regard as the worst offenders.

For example, a single intersection in the southern Guangdong Province has generated upwards of 620,000 tickets, bringing in an estimated 120 million yuan, or US$17 million in revenue, leading some to describe the intersection as a “money-printing machine.”

Authorities monitor a single solid line that if driven on by motorists results in a ticket. 

In another example, in August, 2022, Zhengzhou issued 740,000 parking tickets in just 20 days. Estimating that one ticket is worth 200 yuan, or roughly US$ 27.00, Zhengzhou raked in 150 million yuan, or roughly US $20 million, in less than a month.

Perhaps hardest hit by the fine economy are professional truck drivers. The situation has become so bad that some drivers have been driven to suicide.

In May, 2021 a truck driver from Hebei Province committed suicide after being fined 2,000 yuan and having his truck impounded. He was fined for not engaging China’s BeiDou positioning system, the communist nation’s homegrown satellite navigation system.

Less than a month later, another truck driver from Shandong Province attempted suicide by ingesting pills after being fined 5,000 yuan, or nearly US$700 for an unspecified infraction. Fortunately, he received medical attention and survived the attempt. 

Monthly tickets

Authorities are more interested in the revenue generated by fines rather than road safety, evidenced by the fact that truck drivers can pay their fines in advance via a “monthly fine” and operate how they please, avoiding the scrutiny of traffic police. 

One truck driver described it as such:

“When our trucks pass through Chengwu County, the traffic police will now issue a monthly ticket, based on the vehicle models. Some cost 1000 yuan per month [US$140] some about 2,000 yuan” he said, adding that, “If you don’t pay, they will stop you and give you a hefty fine.”

“If you buy a monthly ticket, you will be able to pass through without obstacles for one month. When you do get stopped, just show the monthly ticket to the traffic police, and you’re good to go.”

A common infraction is an overloaded or overweight vehicle, and in China the vehicle doesn’t even need to be carrying any cargo for it to be considered overweight. 

In at least one case, a truck driver, carrying no cargo, was fined for his vehicle being overweight. He protested saying, “How can I [be] overloaded if I have nothing?” to which the traffic authorities responded, “Even when you aren’t hauling stuff, your truck can still be overweight.”

Mainland Chinese media, Southern Weekly, tallied up the revenue from fines in 2022 for more than 300 medium-sized cities, including ones at the prefectural level. Among 111 cities, 80 of them saw an upward trend in fine revenues in 2021, accounting for 72 percent of the total number of cities. Fifteen cities showed a year-over-year increase of more than 100 percent.


A sputtering economy

These efforts to raise revenues through fining the populace is a direct result of China’s sputtering economy, which is failing to recover following harsh lock down measures implemented to address the COVID-19 pandemic. . 

On July 10, China’s National Bureau of Statistics released the June 2023 Consumer Price Index (CPI) report for 31 provinces. Among them, the CPI of 17 provinces declined year-over-year, and 4 provinces declined for 3 consecutive months.

In fact, nearly all key measures of China’s economy are in decline while youth unemployment rates have surged past 20 percent.

Most startling is a 99 percent drop in inbound visitors to China, which is decimating China’s tourism industry. 

In the first quarter of this year, travel agencies in China received only 52,000 inbound tourists, a staggering 99 percent decrease compared to the 3.7 million visitors in the first quarter of 2019, prior to the pandemic.

While China’s economy did see its gross domestic product (GDP) grow by 6.3 percent year-on-year in the second quarter of 2023, it was significantly lower than expected.

It should be noted that these are official numbers. The reality, in all likelihood, is much worse as communist authorities regularly fabricate data to save face and make things look more favorable than they really are. 

Banks such as JPMorgan Chase, Morgan Stanley, and Citigroup Inc. have caught on and cut their forecasts for China’s growth this year. They have also revised their projected contraction in new construction from seven percent to 20 percent. 

A survey by the Caijing Magazine Industry Research Center in Beijing shows that more than 1.94 million businesses, or about 7 percent of all businesses, were closed in 2022 in the 40 cities that boast the highest income levels in China. Among all the businesses deregistered, micro-enterprises, the backbone of most economies, accounted for 57.4 percent.