Starving zoo animals and cucumber �ines.

China’s indebted cities are

desperate for cash

A Chinese wildlife conservation group issued an unusual appeal earlier this month. The
Endangered Species Fund called for volunteers to donate food to hungry animals kept at a zoo
inside Dongshan Park in the northern province of Liaoning. The zoo is run by the local
government, which was said to be running out of money and therefore unable to feed its
charges.

“There are still bear cubs in the park that need to be fed, the [horse] mare is about to
give birth and her food has been reduced by half, and the zoo’s staff have not been paid for six
months,” the fund wrote in a post on its of�icial Weibo account. “We hope relevant departments
can pay attention to this issue!” The zoo — which has three sika deer, six black bears, 10 alpacas
and hundreds of monkeys and birds — doesn’t charge admission and was reliant on state funds,
but hadn’t received money for six months, according to the fund.
Its predicament is a symptom of the �inancial crisis facing many Chinese city and
provincial governments, which are having to slash spending as they confront a mountain of
debt that swelled during the Covid-19 pandemic and the country’s worst real estate slump on
record. Local governments had to spend billions of dollars on mass testing and lockdowns to
enforce President Xi Jinping’s zero-Covid campaign. The crisis in the property market — which
resulted in a sharp drop in land sales — deprived them of a major revenue source.

As a result, some are turning to extraordinary measures to raise cash, including �ining
restaurants for serving cucumber without a license, and truck drivers for carrying overly heavy
loads. In Wafangdian, the city where the zoo is located, a government employee was cited by
the state-owned Paper.cn as saying funding had been delayed due to the city’s “�iscal stress. A
video posted online by the respected outlet China Newsweek showed a handwritten notice
posted inside the park, saying: “We haven’t paid our staff for six months. The animals have no
food and will soon starve to death.”

CNN wasn’t able to independently con�irm the information as calls to the zoo were not
answered. But news of the ravenous animals went viral. The situation at the zoo was only
resolved when the city government sent money for salaries and food to the facility days after
the online appeal attracted wide attention, China National Radio reported. But the debt held by
China’s regional governments remains a growing risk for the world’s second largest economy.

Willy Lam, a senior fellow at Washington-based think tank The Jamestown Foundation,
estimates the borrowing could total between $9 trillion to $12 trillion, including so-called
“hidden debt” issued by local government �inancial vehicles. These vehicles are legal entities
created by Chinese cities to circumvent borrowing restrictions imposed by the central
government in Beijing. They are often used to channel funding into infrastructure projects.

‘Arbitrary’ �ines
Lam told CNN the situation appears to be “out of control.” “Half of the income generated
by local governments is used to pay the interest on their debt,” he said. “They have to grab every
means to get money: hence the harsh �ines on restaurants and other companies.”

www.alterna�fa.com
 In June, three restaurants in Shanghai were �ined 5,000 yuan ($685) each for serving
shredded cucumber on top of cold noodles without a license, triggering an uproar. “This is such
a heavy punishment for an absurd reason,” said one user on Weibo, China’s version of X, the
platform formerly known as Twitter. “Why hurt small businesses which are the weakest?”
“Cities are doing whatever they can to generate income,” another user said. “Are we going to
see more arbitrary �ines?”

In May, truck drivers in the central province of Henan questioned the accuracy of
weighbridges, used to check vehicles and their loads, after they were repeatedly �ined for
exceeding limits, according to state-owned news outlet Jiemian. One driver complained that he
had received 58 tickets within two years, totaling 275,000 yuan ($37,687). A local transport
department of�icial told Jiemian that “every county has run out of money” after three years of
the pandemic.

“So [we] have to enforce the law properly and impose the �ines that should be imposed,”
the of�icial was quoted as saying. Last year, of�icials in the southern city of Huizhou were found
by central government inspectors to have fabricated evidence so they could impose heavy
penalties on a trucker for dumping construction waste, according to an article posted on the
central government’s website.

‘Fines economy’

At least 15 Chinese cities reported a 100% or more increase in incomes generated from
�ines and con�iscations in 2021, according to a Yuekai Securities analysis of their budgets. The
southern city of Nanchang recorded the biggest jump of 151% compared to the year before,
while the eastern city of Qingdao raised the most — 4.38 billion yuan ($600 million). “The �ines
are essentially cries of desperation for localities in �iscal distress,” said Logan Wright, director
of China markets research at Rhodium Group. “Local governments are responsible for most of
China’s social services, but cannot alter tax rates or the shares of taxes they collect.”

The total amount of taxes the Chinese government collects relative to the size of the
economy has declined steadily since 2015, he said The pandemic has made things worse.
Overall tax income, at all levels of government, dropped 3.5% in 2022 from the previous year,
the biggest fall since China reformed its tax regime in 1993, according to a CNN analysis based
on government statistics.

Fueling anger
The central government appears to have been shocked by the surge in penalties meted
out by local authorities. Last year, Beijing issued a directive forbidding local governments from
imposing “arbitrary �ines” to generate income, and dispatched inspection teams to check that
the policy was being followed.
But the problem hasn’t gone away. Premier Li Qiang, who took of�ice in March, said in
July he would crack down on “arbitrary charges, arbitrary �ines” on private businesses. Fining
individuals and small �irms will only hurt the economy and damage business con�idence, and
could fuel dissatisfaction with Beijing.

www.alterna�fa.com
 “I think imposing what appears like arbitrary �ines on small businesses to compensate
for the signi�icant �inancial shortfalls in local governments is unwise and potentially counter
productive,” said Steve Tsang, director of SOAS China Institute at SOAS University of London.

The scale of �inancial stress among China’s local governments is so big that “creative”
sources of income can only cover a relatively small shortfall, he said. “Arbitrary �ines harm
businesses and reduces the entrepreneurial spirit of small business owners,” he added. What’s
worse, it could make life harder for the poor and ignite more public dissent against the
authorities, said Joseph Cheng, a retired professor at the City University of Hong Kong.

www.alterna�fa.com
 Fill in the Blank With Appropriate Meaning!

1. Penalties :
2. Fabricated :
3. Retire :
4. Ignite :
5. Shortfail :
6. Arbitrary :
7. Con�iscations :
8. Firm :
9. Implications :
10. Volunteer :
11. Appeal :
12. Reduced :
13. Swell :
14. Entrepreneurial:
15. Declined :
16. Weighbridges :
17. Distress :
18. Ravenous :
19. Shredded :
20. Repeatedly :

www.alterna�fa.com