China Runs Out Of Money: All Provinces In Deficit, Even Shanghai Can’t Escape

Elderly people staging fraudulent injury claims, commonly known in China as pengci, has long become a familiar phenomenon. Recently, however, Chinese police officers have also been accused of using similar tactics during law enforcement. A video circulating online shows a police vehicle stopped on the roadside, with four officers surrounding a man during what appears to be a traffic inspection. As the man argues with the officers, he pushes one of them twice. Another officer then loudly orders the pushed officer, fall down, fall down. The officer immediately lies on the ground. The commanding officer then shouts, call an ambulance, before warning the man, don't leave. People filming the incident can be heard laughing and mocking the officers. Comments included, this is beyond ridiculous, it's completely embarrassing, this sets a new low, the acting is terrible, yet he's still telling someone to fall over, it's absurd, and what a disgrace. If you're not embarrassed as a law enforcement officer, I certainly am. There's another video showing police officers staging a pengci incident. Many social media users condemned the officers. One wrote, these abusive police officers now have to rely on fake injury claims to make a living. It's both pathetic and tragic. The communist authorities must be so broke they can't even afford to feed their own dogs anymore. Another commented, the whole country seems to be running out of money lately, strange incidents are happening everywhere. On July 22nd, China's Ministry of Finance released new data showing that none of the country's 31 provincial level administrative regions reached a fiscal self-sufficiency rate of 100% during the first half of the year. Combined, local governments recorded a fiscal self-sufficiency rate of 56.3%, meaning locally generated revenue did not fully cover government spending, including in Shanghai, which has long been China's strongest local economy. At a Ministry of Finance press conference, Tang Zhaifu, deputy director of the budget department, acknowledged that it is normal for local fiscal self-sufficiency rates to remain below 100%. He said local governments depend on transfers from the central government to balance their budgets. Some analysts argue that every province is now spending more than it collects, and that They say China's public finances remain burdened by mandatory spending, including pensions, health care, and interest payments, while tax revenue has fallen short. As a result, the Ministry of Finance, the state taxation administration, and local governments have few options left. One of the most direct approaches, they say, is to turn taxes into administrative fees and fines, which they describe as a way of extracting more money from the public. Official data shows that non-tax revenue reached 2.3 trillion yuan, equivalent to 342 billion US dollars during the first half of the year, up 2.3% from a year earlier. Critics argue that given the sharp drop in land sale income, this increase appears unusual. They claim it has been accompanied by more fines and confiscations, retrospective tax investigations going back 30 years, and broad inspections of social security contributions, effectively turning difficult-to-collect taxes into enforceable penalties. Critics point to a sand and gravel case in Pan'an County, Zhejiang Province. According to their account, private entrepreneur Tong Hao was sentenced to 10 years in prison for disposing of several piles of sand and gravel, while the underlying issue involved an unpaid $59 million debt owned by a state-owned enterprise. They allege that some local governments have increasingly used criminal proceedings to settle debt disputes. Under civil law, governments or state-owned enterprises may have to repay debts and accept legal responsibility. By reclassifying disputes as criminal cases through charges such as illegal mining or contract fraud, critics claim authorities can detain creditors and classify the disputed debt as criminal proceeds subject to confiscation, effectively removing the obligation. They argue that creditors become criminal suspects and efforts to recover debts expose them to prosecution. Although official directives prohibit using criminal law to settle debt disputes, critics say such cases have become more common, arguing that under growing fiscal pressure, legal measures have become a convenient way to reduce debt obligations. On July 25, Trip.com Group was fined nearly 5.2 billion yuan, equivalent to nearly 768 million U.S. dollars, by China's State Administration for Market Regulation. Trip.com is China's largest online travel platform, with businesses that include hotel bookings, transportation ticketing, and vacation travel services. Authorities describe the case as China's first antitrust action in the online travel industry and the first involving what they called a new type of monopolistic conduct. One online commentator noted that the fine ranks fourth among penalties imposed on China's major internet companies. The three largest fines were Alibaba's 18.2 billion yuan penalty in 2021, Didi's 8 billion yuan fine in 2022, and Ant Group's 7.1 billion yuan penalty in 2023. They argued that the smaller fines in recent years do not reflect weaker enforcement. Instead, they said the wealthiest companies have already been targeted, leaving fewer large firms to Another internet user commented, Another wrote, Big corporations drain consumers, then the government drains the corporations, while ordinary people are the ones who ultimately pay the price. On July 23, a person claiming to have worked for eight years at an urban investment company in a coastal Chinese city anonymously submitted information to a Bilibili content creator, alleging widespread problems in the operation of local government financing vehicles, or LGFVs. According to the whistleblower, local governments often use LGFVs as off-budget coffers and debt-buffering platforms. Even when they lack funding, they continue launching new projects by requiring private contractors to pay for construction up front. Payments are often delayed three to five years, leaving companies struggling to survive while workers seek unpaid wages. The whistleblower also alleged that, Some projects fabricate financial projections and inflate expected returns on their proposals. He claimed that subsidiaries under the same LGFV then bid against each other to create the appearance of legitimate revenue and business performance. When projects fail, new borrowing is used to repay existing debt, with the liabilities eventually shifted to the public budget. According to the official website of the Changchun Municipal Government in Jilin Province, Party Secretary Zhang Enhui said on July 22 that the city's economic development is facing unprecedented difficulties and challenges. Chinese local officials usually emphasize positive development and rarely acknowledge economic problems in public. Observers said the unusually direct remarks by Changchun's top official suggest the local economy may be facing serious difficulties. The fiscal strain and government's efforts to raise revenue are also said to be affecting China's political system. According to sources described as insiders, provincial disciplinary inspection authorities launched an internal anti-corruption campaign in April targeting prefecture and county-level officials, leading to what they described as a wave of officials voluntarily surrendering to investigators. On June 8, Enhui's Commission for Discipline Inspection announced that Secretary General of the Provincial People's Congress and member of the party leadership group Du Yan'an had voluntarily turned himself in. He is under investigation for suspected serious disciplinary and legal violations. The following day, July 9, Qinghai's Commission for Discipline Inspection announced that the vice chairman of the Haidong Municipal Committee for the Chinese People's Political Consultative Conference and member of the party leadership group Ma Weizhong had also voluntarily surrendered. He is under investigation for suspected disciplinary and legal violations. An insider within China's political system, He Hongliang, told media outlets that disciplinary inspection commissions across China have launched an internal anti-corruption campaign. It encourages officials accused of corruption to voluntarily confess and disclose misconduct in exchange for more lenient treatment. According to Ye, there are simply too many corrupt officials. The disciplinary authorities do not have enough time to investigate every official's hidden assets and illegal activities one by one. So they launched an intensive internal anti-corruption campaign to encourage voluntary surrenders and improve the efficiency of investigations. The campaign began in late April, and since May, an increasing number of grassroots officials have turned themselves in. A retired official from Guizhou province, Fan Jian, told reporters that corruption is widespread throughout the Chinese Communist Party, and is impossible to eradicate. He said that in parts of central, western, and northwestern China, where local governments face severe fiscal pressure, authorities often take a flexible approach towards officials involved in relatively small corruption cases, who voluntarily return illicit gains. According to Fan, these officials may receive lighter punishment after returning the money and paying fines, effectively increasing local government revenue. The fiscal crisis has also led to a wave of executives from state-owned enterprises and the financial sector fleeing overseas. Recent cases, however, suggest that it has now reached the upper ranks of the CCP. On July 23rd, China's Central Commission for Discipline Inspection issued disciplinary notices against three senior officials in a single day, citing a range of alleged offenses. Tian Xuebin, former vice minister of water resources and former secretary to ex-premier Wen Jiabao, drew particular attention after being accused of obtaining a fraudulent identity card. The other two officials were former vice chairperson of the standing committee of the Tibet People's Congress Wang Jun, who was accused of leaking work-related secrets, and former vice president of Central South University Guo Xueyi, who was accused of illegally claiming conference expenses and accepting large sums of money. Authorities announced that all three had been expelled from the Chinese Communist Party and dismissed from public office before their cases were transferred to prosecutors. It is widely believed that senior CCP officials hold substantial overseas assets and multiple passports. They argued that authorities' decision to publicly cite obtaining a fraudulent ID card as an offense serves as a warning that officials attempting to flee the country has become a growing concern. They also argued that allegations against Wang Jun and Guo Xueyi, including leaking official secrets and improperly claiming conference funds, are linked to the risk of officials fleeing abroad. According to analysts, many senior officials have lost confidence in China's economic outlook and the desire to leave the country has spread to the highest levels of the party. On July 24, Fang Xinhai, former vice chairman of the China Securities Regulatory Commission, was placed under investigation two years after his retirement. Fang has been regarded as a key supporter of quantitative trading and short-selling mechanisms in China's capital markets. Media reports noted that at the 2026 Lujiazui Forum on June 17, Fang praised the growth of mainland China's quantitative investment firms and suggested that Hong Kong financial regulators encourage these firms to expand their operations there. Born in May 1964, Fang graduated from Tsinghua University in 1986 before pursuing graduate studies at the University of Pittsburgh in the United States. After earning his doctorate in 1993, he joined the World Bank. In August 1998, at the invitation of then-president of the China Construction Bank, Zhou Xiaochuan, Fang returned to China to lead the office of the Bank's Group Coordination Committee. According to Hong Kong media reports, while serving as director of Shanghai's Financial Services Office, Fang wrote a letter to Xi Jinping during China's annual parliamentary meetings in 2013. He expressed his willingness to contribute to the development of the nation's financial industry. Soon afterward, he was transferred to the office of the Central Leading Group for Financial and Economic Affairs, where he became director of the International Economic Affairs Bureau in 2014. Fang was widely regarded as an influential economic advisor within China's top leadership. A video of remarks he made at the 2019 World Economic Forum in Davos has recently drawn renewed attention online. In the footage, Fang says that Western democracy faces major problems and needs political reform, prompting laughter from the audience. Fang is the second former China Securities Regulation Commission vice chairman to come under investigation in the past 15 months. Former vice chairman Wang Jianjun was investigated in April 2025, while former CSRC chairman Yi Huiman came under investigation in September last year. The Wall Street Journal reported on July 24, citing people familiar with the matter, that Fang had tried in recent years to leave China and take a senior position at the World Bank in Washington. His application was rejected by the CCP's Central Organization Department. Around the time his request was denied, Fang was also required to submit a detailed report covering his entire career, a procedure sometimes used for officials already under internal suspicion. An official of Fang's rank was ultimately unable to leave China. Analysts argue that beyond factional political struggles, the more important factor is the worsening state of China's economy, with authorities increasingly looking for officials to hold responsible. They note that this happened despite Fang's earlier expressions of loyalty to Xi Jinping. With every province now spending more than it collects, tensions between the central and local governments over fiscal revenue are becoming more pronounced. Analysts warn that the growing fiscal strain could trigger a new wave of social unrest in China. In recent years, reports have frequently emerged of military veterans staging protests to defend their rights. Videos circulating online have also shown elderly veterans, left with few options, wearing old military uniforms while begging on the streets or inside restaurants. Some veterans wear military insignia or medals on their uniforms, while others display banners reading Veteran Begging and boards listing their military service and achievements before describing what they say is the unfair treatment they have received. Recently, however, several retired veterans shared their experiences in WeChat groups, warning others never to beg, collect recyclables, or search through rubbish, claiming that such actions could lead to criminal prosecution. They said that while ordinary citizens might be allowed to beg, military personnel begging was absolutely unacceptable. Screenshots and audio recordings circulating online show one veteran asking in a group text, is begging really a criminal offense? Two other veterans responded with voice messages instead of typed replies. One veteran warned people never to beg, claiming authorities would accuse them of a so-called red begging offense. He said people he had been sentenced to prison after begging in Beijing, with some receiving two-year terms, and others receiving four-year sentences. Another veteran said he had been detained on allegations of red begging, but was ultimately convicted of picking quarrels and provoking trouble, a broadly applied public order charge in China. Another veteran said his family had served the Chinese Communist Party for three generations, only to find that the party had abandoned them. He added, if you're wearing a People's Liberation Army uniform from the June 4th era while begging, you're embarrassing them. How could they not be furious? He said he had served three years and two months in the military, and had once begged while wearing a June 4th era-style military uniform, the style of uniform worn by PLA troops during the 1989 Tiananmen Square pro-democracy protests and subsequent military crackdown. According to him, he was later sentenced to exactly three years and two months in prison, which he believed was an act of retaliation. He also claimed that many veterans had recently been imprisoned over what they described as red begging, or using their credentials to seek donations. Online commentators said that Chinese authorities treat retired veterans harshly and without compassion. At the same time, they argued that officials know veterans have organizational skills and military training, making them a previously provided basic welfare benefits to prevent veterans from falling into extreme hardship. They argued that several local fiscal shortages and corruption within military-related institutions have increased disputes over responsibility, leaving authorities unable to provide adequate support and increasingly relying on coercive measures, raising the risk of future social unrest. Recent reports have also suggested that along with petitioners, workers accused of maliciously demanding unpaid wages, and veterans who beg, food delivery drivers have become another key target of government monitoring. On June 23rd, Chinese authorities issued a policy document expanding the role of Communist Party organizations and political education within internet platforms, private companies, social organizations, and workers in emerging forms of employment. The document directly linked what it called social work to the party's long-term governance, identifying delivery drivers, ride-hailing drivers, and other workers outside the traditional work unit system as priority targets for expanded grassroots oversight. China's Ministry of Social Work acknowledged that food delivery drivers, ride-hailing drivers, and similar workers are highly mobile, making them difficult to manage through traditional workplace organizations. The document therefore calls for party branches to be established within platform companies, franchise stations, and delivery centers to extend organizational oversight to these workers. The National Development and Reform Commission said in July that China now has about 84 million workers in what it calls new forms of employment. The China New Employment Research Center estimates that the broader flexible workforce could reach 320 million by 2026, accounting for about 44 percent of the country's total employed population. Efforts to strengthen organizational control over food delivery workers reportedly began earlier. In 2024, market regulators issued directives requiring authorities to identify Communist Party members working as delivery drivers, establish party organizations within the industry where appropriate, and conduct political education, encouraging drivers to be grateful to the party, listen to the party, and follow the party. Chinese state media reported in April that 112 food delivery drivers in Yongji County, Jilin Province, had been recruited into what officials called a mobile sentry program. They were instructed to photograph, geotag, and upload information they observed while making deliveries, with state media describing them as mobile surveillance cameras. Observers say food delivery workers are mostly young, closely connected through the internet, highly mobile, and able to organize and communicate quickly. They argue that if the group were to stage coordinated protests over income or labor rights, it would challenge China's social stability system. According to these observers, the authorities are tightening control over the sector because they fear prolonged economic weakness could fuel organized unrest. The central government has continued to centralize fiscal revenue by keeping most income from major taxes while assigning responsibility for maintaining social stability, infrastructure, and other public spending to local governments. Analysts say this system, in which revenue is centralized while spending responsibilities remain local, has left local governments with persistent budget shortfalls. They argue that local officials face pressure to meet central government targets while also dealing with a growing number of protests and right defense campaigns, contributing to dissatisfaction among local authorities and weakening administrative effectiveness. At the same time, nearly half of local government revenue reportedly comes from transfers from the central government. Analysts say this high level of dependence further strengthens Beijing's control over local financial resources while deepening tensions between central and local authorities, making internal political conflict within the system increasingly likely.