China’s indebted local governments are increasingly imposing controversial fines on residents in a bid to generate revenue, sparking outrage on social media. A Shanghai restaurateur was fined 5,000 yuan ($702) for serving shredded cucumber without a licence, prompting outrage on China’s Twitter-like Weibo. In a post viewed 9. 5 million times, one user wrote: “If they wanna fine you, even adding vinegar could be wrong. ”
Truckers in Henan province last month made headlines when they questioned the accuracy of government vehicle weighing machines, after being repeatedly fined for exceeding limits: one driver had received tickets totalling $38,000 in the past twoyears. In Guangxi, one of China’s most indebted provinces, a state-backed company sparked anger in May for hiking parking fees, leading some commuters to rack up thousands of yuan in charges. These scandals represent a broader trend of local governments using fines to bolster their coffers.
A state council inspection last year found that in the wake of the pandemic and other economic difficulties, local government penalties had become more severe. Guangxi alone made 13 billion yuan from fines last year, according to an analysis of government data by Caijing Industry Research Centre — equivalent to about 14% of its tax income, rising from 9% in 2021. “It’s a sign of desperation,” said Victor Shih of the University of California who specialises in China’s banking policies.
China’s local governments have suffered the dual blows ofthe pandemic and a property crackdown from Beijing, leaving them with too little income to spend on salaries and building roads, while at the same time paying their debt bills. Goldman Sachs Group estimates China’s total government debt is about $23 trillion.
The central government reiterated this month that provinces have to fix hidden debt problems on their own, leaving local officials to get more creative to raise revenue. Last year, a grocer in Shaanxi province was fined 66,000 yuan for selling2. 5kg of substandard celery, while in August, officials in Guangdong were found to have falsified evidence to fine trucks for suspected illegal dumping.
The levies are unlikely to make a much difference to the shortfall in local finances. Still, excessive fines will probably remain a feature as provinces are left to shoulder their own problems. “As fines and regulatory burdens kill off the SMEs, local governments would further lose tax income, become even more reliant on fines,” Zerlina Zeng, a credit analyst.
Truckers in Henan province last month made headlines when they questioned the accuracy of government vehicle weighing machines, after being repeatedly fined for exceeding limits: one driver had received tickets totalling $38,000 in the past twoyears. In Guangxi, one of China’s most indebted provinces, a state-backed company sparked anger in May for hiking parking fees, leading some commuters to rack up thousands of yuan in charges. These scandals represent a broader trend of local governments using fines to bolster their coffers.
A state council inspection last year found that in the wake of the pandemic and other economic difficulties, local government penalties had become more severe. Guangxi alone made 13 billion yuan from fines last year, according to an analysis of government data by Caijing Industry Research Centre — equivalent to about 14% of its tax income, rising from 9% in 2021. “It’s a sign of desperation,” said Victor Shih of the University of California who specialises in China’s banking policies.
China’s local governments have suffered the dual blows ofthe pandemic and a property crackdown from Beijing, leaving them with too little income to spend on salaries and building roads, while at the same time paying their debt bills. Goldman Sachs Group estimates China’s total government debt is about $23 trillion.
The central government reiterated this month that provinces have to fix hidden debt problems on their own, leaving local officials to get more creative to raise revenue. Last year, a grocer in Shaanxi province was fined 66,000 yuan for selling2. 5kg of substandard celery, while in August, officials in Guangdong were found to have falsified evidence to fine trucks for suspected illegal dumping.
The levies are unlikely to make a much difference to the shortfall in local finances. Still, excessive fines will probably remain a feature as provinces are left to shoulder their own problems. “As fines and regulatory burdens kill off the SMEs, local governments would further lose tax income, become even more reliant on fines,” Zerlina Zeng, a credit analyst.