Agencies
China is cracking down on behaviours from law enforcement seen as detrimental to the ordinary function of private businesses, a crucial step in restoring confidence as the country embarks on a whole-of-government effort to ensure a steady, sustainable economic recovery.
Jurisdiction-breaking trips by officers to detain suspects, arbitrary fines and disparities in the punishments meted out to private and public entities have all been areas of frustration for China’s enterprises.
As Beijing attempts to rally the private sector to reverse an economic slump, analysts said, entrepreneurs are expecting action to go along with words before they consider rekindling their faith.
But those words are still being spoken – and louder than ever. In a Tuesday meeting on the economy, Premier Li Qiang told an assemblage of business leaders that Beijing would "resolutely root out” persistent problems like fines, inspections and forced closures to guarantee peace of mind.
"The key to stabilising the economy is to stabilise enterprises,” Li was quoted by state news agency Xinhua as saying. "We must do a good job in helping them tide over difficulties and ensure they can benefit from policies.”
On the same day, the National Development and Reform Commission (NDRC) – China’s top economic planner and an overseer of the private sector – pledged to improve the situation at a widely watched press conference."We shall adopt a more inclusive, prudent and flexible approach … and rein in excessive ‘cross-region’ enforcement,” said NDRC chairman Zheng Shanjie. "We must not capriciously impose fines, conduct blitz checks or seal up facilities.” Localities with abnormal rises in fines and seizures, he added, would be subject to investigation by the commission.
In a surprise meeting at the end of September, the Communist Party’s Politburo reaffirmed the need for a dedicated law to protect and nurture the private economy.
Beijing is looking to its private sector as it strives to reach its annual economic growth target of "around 5 per cent”, but that achievement remains elusive as weak consumption figures, a faltering property market and numerous challenging externalities threaten to throw matters off track.
Per the country’s National Bureau of Statistics, the private sector contributed to half of China’s total tax revenue, 60 per cent of gross domestic product and 80 per cent of urban employment in 2023.
"Entrepreneurs have guarded expectations following the latest assurances, but they know from past experience it takes time for words to be put into action,” said Fu Weigang, executive president of the Shanghai Institute of Finance and Law think tank.
"One way to deter some cadres and instantly restore business sentiment is to make swift, high-profile rectifications, punishing officials to amplify the pro-business message.”
Cases of "cross-region” enforcement, where unscrupulous actors travel beyond their jurisdictions to detain people and collect fines, have been pervasive enough to be colloquially likened to fishermen trawling in offshore waters.
In a reflection of the scope of the problem, a clause in a draft law on the promotion of the private economy calls for coordination and uniform standards when a case crosses regional borders.
"If a case requires law enforcement in a different place,” the draft reads, "statutory powers, conditions and procedures shall be observed.” The latest version of the law has been released by the NDRC and Ministry of Justice to solicit public opinion.
Such cases have been on the rise in recent years, as the finances of many local governments have fallen under strain. National tax revenue dropped 5.6 per cent year on year in the first half of 2024, but non-tax income – mainly fines – rose 11.7 per cent to 2.18 trillion yuan (US$308.2 billion).
Provinces such as Zhejiang, Jiangsu and Guangdong, known for their thriving private economies, have frequently been on the receiving end.