Local governments in China are “shaking down successful private companies” to supplement their coffers because of the country’s sluggish economy, according to Human Rights Watch.
The rights watchdog says this coercive activity, known as “distant water fishing”, involves poorer inland governments reaching beyond their jurisdictions to “catch” companies based in wealthier coastal provinces.
“They accuse them of fraud or other wrongdoing, freeze and confiscate their assets, and then compel them to pay large fines,” it said in a report on Sunday (November 10).
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A government-run research body published a memo suggesting that close to 10,000 companies in the tech hub Shenzhen and elsewhere in Guangdong province had encountered this “cross-jurisdiction law enforcement.”
That memo, meant for internal circulation, attracted widespread attention after it was published in part in an October media report, HRW said.
It noted that China’s Central Committee pledged on September 26 to “standardize enforcement and regulatory actions related to enterprises,” adding that the head of China’s top economic planner had reassured businesses on October 8 that “unauthorized and profit-driven enforcement measures” against private companies were not permitted.
A top economist, Zhou Tianyong, warned in late September that local governments were extorting money from entrepreneurs using the Chinese Communist Party’s “disciplinary commissions.”
The commissions, which enforce Party ideology and discipline, had allegedly detained entrepreneurs in their “liuzhi” detention system, “where detainees are routinely tortured” and intimidated, the rights agency said, so that people “agree” to pay the money demanded. Zhou’s post had been deleted, it said.
The rights agency noted that many wealthy and well connected people in China had gone missing, been imprisoned, or been punished in recent years for failing to adhere to the Party line – people like Alibaba’s Jack Ma, investment banker Bao Fan, and tech company founder Chen Shaojie.
Its conclusion was that “nobody is safe” in “authoritarian systems where the laws are under the government’s control.”
Other factors in this situation are the economic slowdown China has endured since the Covid pandemic, plus the huge debts accumulated by financing vehicles set up by many local governments, which are said to total about $13 trillion.
Lawmakers in Beijing agreed last week to a $1.4 trillion bailout to help them pay off these vast “hidden debts”.
- Jim Pollard
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