October 23, 2024 — Due to financial strain, local governments in China have made cross-province "raids" on private enterprises a common practice. This is referred to as "offshore fishing" in China’s legal circles. An internal report from Guangdong revealed that nearly 10,000 companies in Guangzhou alone have been victimized. While Beijing has recently claimed to curb "profit-driven law enforcement," experts believe the central government is well aware of local financial difficulties and is covertly allowing this profit-driven enforcement to maintain local stability.

Cross-Province Profit-Driven Enforcement Leads to Over 10,000 Private Enterprises Suffering in Guangzhou

On October 16, China Times disclosed a report published by the Guangdong Provincial Situation Research Center in April this year. One section of the report, titled "Internet Companies Suffer from Cross-Province Profit-Driven Law Enforcement, Struggling to Survive," highlighted that Guangzhou, Shenzhen, Dongguan, and other cities in the Pearl River Delta have become hotspots for this type of enforcement.

For example, since 2023, nearly 10,000 companies, such as Pupu, Yi Health, and Jiujun, have fallen victim to cross-province law enforcement in Guangzhou. Most of these companies are privately owned, and a significant number of cases have clear profit-driven motivations behind the law enforcement actions.

The practice of illegally arresting private entrepreneurs across provinces, seizing and freezing assets, and even transferring company and personal property has been labeled as "offshore fishing" by legal professionals. Authorities typically seize company assets and detain top executives during the investigation stage, using threats and intimidation to secure financial settlements.

Several cases were mentioned in the report. In one instance, the police from a county in Chongqing arrested 155 employees of a company producing herbal bath products after just one customer complained the product didn’t work. The case involved 2 billion yuan (RMB).

In another case, a person in northern China reported buying ineffective health supplements. The local authorities then raided the management and employees of a Guangdong-based company, with claims of billions of yuan involved.

Another example involved "entrapment." A collector in a county in Henan Province submitted his collection for appraisal at a Shenzhen auction house, which charged a 5,000-yuan appraisal fee. After paying the fee, the collector reported the company for fraud. Subsequently, 47 employees were arrested, and the company’s assets worth millions were seized.

In Zhangjiajie City, Hunan Province, a local police chief openly told a business owner that the investigation’s goal was to extract a "reasonable sum" of 10 to 20 million yuan.

Chinese media has commented that with increasingly strained local finances and the fact that fines go into local coffers, judicial authorities are highly motivated to engage in "offshore fishing" for revenue.

David Huang, a U.S.-based economist, told Epoch Times that competition between local governments has always existed in China. When the economy falters, tensions between different regions intensify. Profit-driven law enforcement is also tied to the CCP’s promotion system, where officials, lacking management skills, often resort to brute force to secure financial gains.

Rights lawyer Wu Shaoping, also based in the U.S., told Epoch Times that calling this practice "offshore fishing" is a form of dark humor, but it somewhat beautifies the behavior. The term reveals how much of a societal scourge cross-province law enforcement by CCP authorities has become.

He believes that Xi Jinping's regime has expanded police powers not to genuinely combat crime but to create a police state and instill fear. The attention on this issue has grown in recent years as the situation has worsened.

Beijing Claims to Curb Abuses, But Experts Say CCP Leaders Encourage Misconduct

In fact, the Ministry of Public Security issued specific regulations in 2021 prohibiting profit-driven law enforcement and illegal jurisdiction over cases with forfeiture revenue.

On October 8, Zheng Zhajie, head of the National Development and Reform Commission, emphasized at a press conference the need to curb illegal cross-province law enforcement and arbitrary fines. Premier Li Qiang also chaired a meeting on the same day, stressing the need to prevent such practices.

However, on September 25, Zhou Tianyong, Deputy Director of the Institute of International Strategy at the CCP's Central Party School, published an article calling for an "urgent halt" to local governments extorting private entrepreneurs for fiscal gain, warning that this could lead to an economic disaster. The article was swiftly deleted.

David Huang stated that the central government has long been aware of these activities but often turns a blind eye due to mutual cover-ups. "They can’t outright ignore it, but they rely on local governments to implement their policies and on the police to maintain stability. Excessively cracking down on local authorities could undermine the central government's control, so they compromise and allow local law enforcement agencies to gain power."

Another reason, Huang explained, is the severe financial strain on local governments. Many violent law enforcement agencies are funded by local governments. "The central government knows that multiple factors contribute to this, but it is challenging to address systemically. If this deteriorates and threatens local stability, the central government will step in."

Wu Shaoping noted that under China’s criminal procedure law, law enforcement agencies must notify local authorities and coordinate with them when enforcing actions in other regions. However, because both sides are law enforcement personnel, victims have no recourse. The main reason for the widespread abuse is the fiscal strain faced by local governments, which the central government tacitly approves. It publicly claims to crack down on such practices but takes no meaningful action.

"Have any officials lost their jobs over this? No. Have any been jailed? No. In fact, they are often rewarded for increasing local revenues through these actions. Local governments are encouraged to continue, and this is the result of the CCP’s tacit approval. The local governments are financially struggling, and the central government doesn’t provide money, so they find their own ways to survive."

He emphasized that if local officials couldn’t make money, they would no longer work for the CCP, which would hasten the collapse of the regime. The central government allows this practice as a crucial tool to maintain control.

The Guangdong report mentioned Yi Health Group, which was targeted by "offshore fishing." In 2022, the company generated 2.423 billion yuan in revenue and had planned to go public in Hong Kong. In October 2023, more than 1,600 police officers from the cities of Jiaozuo and Shangqiu, Henan Province, raided Yi Health’s subsidiaries in Guangzhou, despite the case only involving 600,000 yuan. Police froze 64 accounts linked to the company.

Yi Health was forced to withdraw its listing application and is now on the verge of bankruptcy, unable to resume operations due to financial difficulties.

David Huang noted that such actions by the CCP have worsened the business environment, spreading fear among foreign investors and the public. Many investors may choose to exit or stay inactive in the future.

Wu Shaoping added that the most direct consequence is an increase in failing businesses in China, directly harming economic growth. Investors will be too scared to invest, set up factories, or hire workers, further destabilizing society.

On October 13, Observer published an article by Liu Chengliang, a researcher at Soochow University’s Dongwu Think Tank, revealing that the CCP’s total revenue from fines and forfeitures reached 428.3 billion yuan in 2022, accounting for 2.1% of public budget income and 11.57% of non-tax revenue— the highest proportion in the past decade.

Edited by: Li Renhe