Interpreted as Measures to Drive Economic Recovery
Collection Amount Increased by 25.9% from 2020 to 2022
The Chinese government has announced plans to regulate the excessive imposition of fines and penalties on companies and individuals. This follows previous announcements to reduce various fines and emphasizes strict enforcement and rigorous responses. This move is interpreted as an effort to create a pro-market atmosphere and lead a private sector-driven economic recovery.
According to Chinese economic media Caixin on the 21st, the State Council recently issued the "Guiding Opinions on Additional Regulation and Supervision of the Setting and Enforcement of Penalties," stating that issues such as unjustified increases in fines and illegal dispositions will be strictly investigated and punished. The related "opinions" emphasize that fines must be imposed in accordance with the principles of the Administrative Penalty Law. Except in cases related to citizens' life, safety, and health, penalties should not exceed ten times the minimum amount, and the highest fines should not be arbitrarily imposed.
It also stressed the need for strict standards regarding the use of illegal electronic monitoring equipment under the pretext of law enforcement. The use of illegal monitoring devices must be immediately stopped, and relevant information can only be collected, analyzed, and judged after legal and technical review. Furthermore, during the process of imposing fines or penalties, opinions from experts, scholars, and other stakeholders should be gathered regarding the amount and method of imposition.
Recently, controversies over excessive fines have been ongoing in China. In a high-tech zone supermarket in Yulin City, Shanxi Province, a fine of 200,000 yuan (approximately 37.06 million KRW) was imposed by the Market Supervision Bureau after the store sold four packs of expired yogurt for 60 yuan, which sparked public attention. Additionally, a farmer in Fuzhou was fined 100,000 yuan for selling celery worth 14 yuan after failing a sampling inspection, drawing criticism for the excessive penalty.
The State Council stated, "This is based on protecting the legitimate rights and interests of enterprises and the public and optimizing a legalized business environment," adding, "Fines will be scientifically set according to the law, enforcement will be strictly regulated, and supervision over penalty measures will be comprehensively strengthened."
Caixin pointed out, "Fines are one of the means of administrative punishment, and when individuals or companies pay fines, it means an increase in government revenue," noting that "arbitrary collection has been criticized, and concerns over abuse of authority by relevant departments are growing amid downward economic pressures." It further explained, "The majority of those fined are enterprises and self-employed individuals, who are key players in the private economy. They are also important targets for promoting economic development and growth and protecting people's livelihoods."
In October last year, the State Council reviewed and approved the "Decision on the Cancellation and Adjustment of a Number of Fine Items" at the Standing Committee meeting. As a result, 33 items in administrative laws and regulations and departmental rules that imposed fines on enterprises were abolished or adjusted. In August 2022, 53 fine items related to enterprises in sectors such as transportation and markets were abolished or adjusted, demonstrating a pro-business approach.
Meanwhile, according to the central government’s fiscal budget report, fines and administrative fees imposed by governments at all levels reached 850 billion yuan in 2022, accounting for 4.2% of China’s total fiscal revenue. The Hong Kong South China Morning Post (SCMP), citing analysis by Luo Zhiheng, an economist at Weikai Securities, reported that related collections increased by 25.9% between 2020 and 2022, indicating that authorities sought to generate more revenue through fines.
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