China's Financial Strain Fuels "Distant Trawling" Expanded to Individuals | China Truths

Welcome to China Truths. In this episode, we will bring you the following story. China's Financial Strain Fuels Distant Trawling Expanded to Individuals. Now, let's dive into the details. It's all covered in today's China Truths. China's Financial Strain Fuels Distant Trawling Expanded to Individuals. In recent years, China's local governments have faced mounting financial pressure, leading to rampant instances of judicial distant trawling targeting private enterprises and individuals in other provinces. The Pearl River Delta has become a hotspot for such profit-driven law enforcement, with local private businesses severely impacted, and some even experiencing operational collapse. A recently leaked report from the Guangdong Provincial Situation Research Center, published in April, reveals that cities such as Shenzhen, Guangzhou, and Dongguan in the Pearl River Delta have become focal points for distant trawling in recent years. Distant trawling refers to cross-province actions by public security agencies, including arrests, asset freezes, and even the transfer of property owned by external enterprises and individuals. For instance, since 2023, nearly 10,000 companies in Guangzhou, including Pupu and eHealth, have been subjected to such actions, predominantly targeting private enterprises with profit-driven motives. One high-profile case involves eHealth Group, a Guangdong company with an annual revenue exceeding 2.4 billion yuan or about 331 million US dollars. In June 2023, it applied for a Hong Kong IPO, but public security forces from Jiaozuo and Shangqiu in Henan Province deployed over 1,600 officers to Guangzhou, alleging a 600,000 yuan fraud. This operation disrupted eHealth's IPO plans and paralyzed its operations. Taiwanese financial expert Huang Shih-tsung pointed out that such extreme measures to harvest leaks reflect the severe financial strain faced by local governments in China. Previously, authorities ordered wealthy individuals and companies to conduct self-audits for tax purposes. Now, they've resorted to distant trawling to generate income. This reflects how serious the local fiscal problems are. Economic hubs like the Pearl River Delta and Yangtze River Delta, with their prosperous industries, are prime targets for further exploitation. The practice of distant trawling appears to be shifting towards ordinary citizens. On October 31, a woman in Shaoxing, Zhejiang, posted a video lamenting that her husband, struggling in business, sold a luxury watch for 400,000 yuan to raise funds. However, their bank account was frozen shortly after receiving the money. Police from Shiyan, Hubei, alleged that the watch sale was linked to a telegraphic transfer fraud and detained her husband. In another case, public security forces from a county in Chongqing launched a fraud investigation based on a single consumer complaint about ineffective herbal bath packs. Over 300 officers raided a Hangzhou manufacturer, arresting 155 individuals, with the alleged fraud amount reaching 200 million yuan or about nearly 28 million U.S. dollars. Former Taiwanese legislator and commentator Huang Ping-siao criticized distant trawling as thinly veiled state-backed extortion, leaving ordinary citizens defenseless. They arrest first and then extort. Innocent individuals targeted by these extrajudicial actions find no recourse, as there's no one to appeal to. Once confiscated, the penalties and confiscated income are handed over to local governments, which then redistribute funds back to the law enforcement agencies involved, either as direct rewards or through routine budgets. Due to decline in fiscal revenues across many regions in recent years, confiscated income has noticeably increased. Some localities tie law enforcement budgets directly to confiscation quotas, exacerbating selective and profit-driven law enforcement practices. Although distant trawling is not a new phenomenon, its prevalence has surged as local governments face economic hardship. In 2021, Beijing issued a seven provisions prohibiting profit-driven law enforcement for public security agencies. Recently, the National Development and Reform Commission, NDRC, and state media have criticized the practice, warning that it jeopardizes businesses' survival and urging authorities to prioritize economic recovery and create a favorable business environment. David Huang, a U.S.-based economist, believes that the central government relies on local governments to maintain stability and safeguard its rule. Thus, Beijing is unlikely to strictly curb local governments or public security agencies, resulting in mutual concealment and complicity between central and local authorities regarding distant trawling.