Cover Story: How Profit-Driven Law Enforcement Can Kill Businesses

In June 2023, a businessman named Shen from Jiangsu, China was taken by two policemen from another province. They pressured him for money, leading him to escape and report the ordeal to local authorities. The two officers, Yang and Zhan, were genuine policemen arrested for abusing power and were subsequently sentenced to prison terms of eight and seven months, respectively [para. 1][para. 2][para. 3].

This incident highlights a concerning trend where financially stressed local governments target private businesses from other regions to boost revenues by imposing exorbitant fines and seizing assets—a practice known as "distant-water fishing." It has serious implications, such as undermining business property rights, corrupting law enforcement, eroding judicial fairness, weakening the rule of law, and damaging the business climate [para. 4][para. 5].

In Zhejiang Province, a campaign against profit-driven law enforcement revealed over 17,000 cases of improper asset seizure, recovering substantial sums and assets for affected businesses. Nonetheless, Zhejiang is not unique in this malfeasance. The trend extends to Guangdong, where about 10,000 companies have been similarly targeted. These practices, driven by profit motives, undermine national efforts to protect private enterprises and stimulate business confidence amid economic slowdowns [para. 6][para. 7][para. 8].

In response, Premier Li Qiang underscored the need for improved law enforcement, focusing on regulating business-related activities and addressing excessive fines and penalties. A draft of the Private Economy Promotion Law, released in October, aims to mitigate profit-driven actions by outlining clearer asset confiscation guidelines, though arbitrary penalties persist due to insufficient oversight [para. 9][para. 10].

Legal weaknesses allow these practices to persist, with local governments increasingly relying on fines and confiscations as revenue sources amid financial constraints. This dependency is due, in part, to a 1982 policy that allowed judicial bodies to recover a portion of fines for expenses. Subsequent laws have attempted to separate income collection and expenditures, but incomplete implementation maintains the incentive for profit-driven enforcement. Furthermore, loopholes in jurisdictional laws, especially in cybercrime cases, enable this enforcement overreach [para. 11][para. 12][para. 13][para. 14].

Addressing this issue requires severing financial links between revenue collection and judicial department expenditures, focusing on redistributive fiscal transfers, and strict national oversight. Legislative amendments to the Criminal Procedure Law are underway, seeking to close gaps that allow profit-driven practices [para. 15][para. 16].

The misuse of cross-regional law enforcement extends beyond the intended purpose of balancing local and national interests, contributing to unauthorized enforcement actions. Legal stipulations have expanded crime location definitions, facilitating this enforcement creep, underlining the complexity of jurisdiction in the digital age and exacerbating challenges in handling internet-related offenses [para. 17][para. 18][para. 19].

The ongoing misuse of jurisdiction for financial gain poses a significant threat to private businesses, potentially collapsing them under the weight of monetary enforcement, consequently calling for urgent reforms to prevent excessive judicial overreach and restore business confidence [para. 20][para. 21].