China's local governments are seeking to increase revenue by imposing controversial fines on their own residents, causing frustration among the population through excess bureaucracy and potential corruption. In some cases, residents have faced fines for seemingly trivial offenses, such as a Shanghai restaurant owner who was fined 5,000 yuan (approximately $702) for serving shredded cucumber without a license, leading to widespread criticism on social media.
Another incident involved truck drivers in central Henan province, who repeatedly received tickets worth $38,000 in total for exceeding vehicle weight limits. After questioning the accuracy of the government weighing machines, the truckers brought the issue to national attention.
In one of China's most indebted provinces, Guangxi, local state-backed companies faced backlash in May 2021 for increasing parking fees. As a result, commuters were charged thousands of yuan until social media users questioned the fines' legitimacy, leading to a press conference with the Nanning city mayor who apologized for the incident.
These high-profile scandals reflect an increasing trend in local governments using fines to bolster their finances. According to a State Council inspection in 2020, local government penalties became stricter and more severe due to the pandemic and other economic difficulties. Caijing Industry Research Center also found that Guangxi alone made 13 billion yuan from fines in 2020, equivalent to approximately 14% of its tax income and up from 9% in 2019, as local governments face sluggish economic growth and large amounts of debt.
While China's central government has reiterated that provinces must address hidden debt issues independently, local officials have been given the responsibility of raising revenue for their area's spending. However, this has led to excessive fines and fees, causing outrage and scrutiny from the public and media. The grocer in Shaanxi province was fined 66,000 yuan for selling 2.5 kilograms (5.5 pounds) of substandard celery, exemplifying local governments' extreme measures to obtain revenue.
Despite these fines, the shortfall in local finances remains, and the excessive fines imposed by local governments are unlikely to provide significant financial support. Zerlina Zeng, a senior credit analyst at CreditSights Singapore LLC, stated that exorbitant fines would only result in a decline in the number of SMEs and, in turn, reduce tax income, leading to increased dependence on fines and transfers from upper-tier governments.
In conclusion, fines and fees imposed by local governments represent a stop-gap measure that only further frustrates residents and businesses. As economic growth slows, this trend is likely to continue, leaving local governments searching for new ways to fill the gap in their finances.