In recent days, an audio recording circulating on several social media platforms revealed that a company in Tangshan, Hebei Province, was targeted for cracking down on network marketing by the market supervision bureau in Chengwu County, Shandong Province. The bureau planned to impose a hefty fine of 25.58 million yuan on the company. A suspected staff member of the bureau was heard negotiating the fine amount with the involved company, claiming that “supporting a business is beyond my ability, but destroying one is too easy,” and disclosing the need to achieve an annual “performance target” of 50 million yuan.
According to reports from Upstream News and Frontline News, this incident is related to an investigation by the market supervision bureau in Chengwu County, Heze City into a suspected case of “network marketing.” On July 29, 2024, the Market Supervision and Administration Bureau of Chengwu County issued an “Administrative Penalty Notice,” indicating fines totaling 5.4 million yuan imposed on three companies involved, in addition to confiscating illegal profits.
Information obtained by mainland media about the case revealed that the involved companies mentioned various instances of unreasonable and non-standard law enforcement by law enforcement officer Zhang during the investigation process, including statements made during communications with the company.
When the company offered to provide contract and other evidence to assist with the investigation, the staff member said, “Whether you provide the evidence or not, as long as the negotiation is not good, everything is considered void.” Additionally, the enforcement officer mentioned that they had completed 21 million out of the 50 million performance target for the year and still needed to achieve 29 million more.
On August 14, Zhang, the enforcement officer in Chengwu County Market Supervision Bureau involved in the case, responded to the statement about the 50 million yuan performance target, saying it was just said casually and intended to encourage active cooperation from the company.
However, as reported by Sina Finance on the 13th, a proxy lawyer considered the case of the Buck company as a typical example of unauthorized jurisdiction and enforcement for personal gain. Without jurisdiction and before imposing administrative penalties, the Chengwu County Market Supervision Bureau froze 94.45 million yuan of funds belonging to related companies and individuals, citing the reason as “preventing the transfer or concealment of funds related to network marketing.”
Even more absurdly, the Chengwu County Market Supervision Bureau used the threat of delaying case processing and continuing to freeze funds to pressure designated “related lawyers” into bargaining over the penalty amount.
The proxy lawyer discovered that the Buck company’s experience was not unique. Through preliminary online searches, it was found that since 2020, the Chengwu County Market Supervision Bureau had frozen deposits totaling a staggering 781 million yuan under the names of companies such as Top Learning (Beijing) Educational Technology Co., Ltd., Dalian Changxing Island Economic Zone Jingdaotang Vocational Training School Co., Ltd., Xihai International Group Co., Ltd., Zhongkangming Shike Technology Development (Haikou) Co., Ltd., and Hangzhou Yueyang Biotechnology Co., Ltd., using the pretext of cracking down on network marketing, creating a “anti-network marketing economy” in Chengwu County.
The so-called “anti-network marketing economy” judges whether to investigate based on the ability to seize funds, targeting external companies to create cases and enforce for personal gain.
In fact, the strategy of profiting under the guise of cracking down on network marketing, as seen in Chengwu City Market Supervision Bureau in Shandong, is not a new approach. The officials in Tianmen City, Hubei Province, are also well-versed in this method.
According to sources, the so-called anonymous reports often involve local relevant departments arranging individuals to infiltrate related sales platforms, collect so-called evidence, and subsequently enact penalties based on those findings.
The aforementioned reports have sparked public attention and discussions online.
Many netizens commented, “This is what our county businesses in Chengwu are facing, it’s terrifying. When they lack money, they find some excuse to fine you.” Another said, “It’s the truth; the overall business environment in Shandong is like this. If private enterprises are not given preferential treatment, how can their income be guaranteed? They all want quotas.”
“Some officials in the north have no respect for businesses, they crush them like ants.” “In the city of Guangdong where I live, the Market Supervision and Administration Bureau specifically targets businesses without any connections.”
“Fines have set targets, but some departments will not openly admit it, while others will take different approaches.” “Continuing like this will eventually bring down most businesses; let’s see who you can still exploit!” “Reminds me of a quote from ‘The Great Qing Dynasty 1566’: throughout history, when the national treasury is empty, they either come after the people or the merchants.”
It is worth noting that as the Chinese economy continues to shrink, the national tax revenue for the first half of this year has shown a decline year-on-year, while non-tax revenue has increased. Non-tax revenue includes administrative and institutional fees, penalty income, among others.
According to statistics from Economic Observer Network, among the 15 provinces that have published data on fiscal and non-tax revenue breakdown, only Chongqing and Shaanxi saw a decrease in the proportion of non-tax revenue to general public budget revenue, while 13 provinces including Beijing, Tianjin, Shanxi, and Shandong saw an increase in the proportion of non-tax revenue. In Fujian, non-tax revenue accounted for 42.3% in the first half of 2024.
A local finance department official told mainland media that the main reason for the growth in non-tax revenue is the insufficiency of tax sources. In the current situation where existing tax sources cannot support the expected increase in fiscal revenue, local governments have to explore the potential of increasing non-tax revenue.
The so-called “penalty income” in non-tax revenue has long been criticized. In recent years, exorbitant fines have been imposed in various parts of China. For instance, an elderly person received penalties totaling 100,000 yuan for selling unqualified celery that brought profits amounting to 14 yuan.