Free to Read - Two Sessions: Beijing to Curb Private Company Shakedowns

Li Qiang announces initiatives to address ‘arbitrary charges, fines, inspections and seizures’

Premier Li Qiang delivers the government work report on Wednesday at the opening of this year’s annual session of the National People’s Congress in Beijing. Photo: Xinhua

China’s central government is ramping up efforts to crack down on profit-driven law enforcement, rolling out measures to curb abuses and to improve the business climate.

Amid sluggish economic growth in recent years, some local governments have turned law enforcement into a profit-making scheme to bolster their budgets.

Beijing will launch initiatives to address “arbitrary charges, fines, inspections and seizures” and take steps to prevent “unauthorized cross-jurisdictional and profit-driven law enforcement,” Premier Li Qiang announced Wednesday while presenting the government’s work report at the “Two Sessions” in Beijing.

The Two Sessions is the collective name given to the annual meetings of China’s top legislature and political advisory body.

Earlier this year, China’s top judicial bodies pledged to establish mechanisms to combat local protectionism and strengthen the review of criminal cases in which law enforcement bodies carry out interprovincial operations and seize assets. This practice has drawn criticism for undermining property rights, infringing on entrepreneurs’ legitimate interests and violating basic judicial principles.

Liu Junhai, a professor of law and director of the Business Law Institute at Renmin University of China, stated that the inclusion of this issue in the government work report will elevate its importance and can strengthen enforcement.

“This is certainly good news for private enterprises,” Liu said.

Elevating oversight and accountability

The practice referred to as “long-distance fishing” is the most notorious example of profit-driven law enforcement overreach, where local authorities charge companies based in other provinces with crimes as a pretext to seize their assets.

To address the issue, Liu suggested stricter regulations for cross-regional investigations, such as local authorities requiring approval from higher-level agencies before they are allowed to seize assets or levy fines. He also called for greater accountability for cases of official wrongdoing, such as officials being on the hook for compensating affected parties in addition to disciplinary and criminal consequences.

In addition, Liu proposed that assets seized in criminal cases should be turned over to the central authorities, removing the incentive for local governments to turn to “long-distance fishing.” Zhu Mingyong, a lawyer from Beijing Jingmen Law Firm, made similar suggestions during a seminar held last year.

Tackling arbitrary enforcement

China will also rectify other corporate-related enforcement issues such as excessive fines and arbitrary inspections, according to Luo Wen, the head of the State Administration for Market Regulation (SAMR).

In 2024, the SAMR investigated over 3,000 cases involving fees illegally collected from enterprises and ordered the return of 1.36 billion yuan ($187.5 million) to businesses, Luo said on Wednesday on the sidelines of the Two Sessions.

Regarding fines, the regulator will follow the principle of proportionality, ensuring that minor offenses receive lighter penalties, Luo said. The SAMR will also expand its exemption lists of first offenses and minor violations to prevent excessive penalties being handed out.

In addition, the regulator will minimize on-site inspections of enterprises, introducing a “non-disruptive” list for industries with low regulatory risks. Companies with good credit can be exempted from inspections while digital oversight will replace physical checks where possible.