China's Cash-Strapped Cities Face Dire Consequences: Starving Zoo Animals and Unconventional Cucumber Fines

A Chinese wildlife conservation group made an unconventional plea earlier this month.

The Endangered Species Fund has urged volunteers to contribute food for hungry animals housed at a zoo within Dongshan Park in the northern province of Liaoning. The local government, responsible for running the zoo, is facing financial difficulties, leading to a shortage of funds to adequately feed the animals.

According to a statement posted on the fund's official Weibo account, there are bear cubs in the park that still require nourishment, the pregnant mare's food supply has been reduced by half, and the zoo's staff have not received their salaries for six months. The fund appeals to the concerned authorities to address this matter.

The zoo, housing three sika deer, six black bears, 10 alpacas, and numerous monkeys and birds, used to operate without admission charges while relying on state funds. However, for the past six months, the zoo hasn't received any funding, as reported by the fund.

This predicament exemplifies the financial crisis currently affecting numerous Chinese city and provincial governments. These authorities are compelled to significantly reduce expenditure due to the enormous debt accumulated during the Covid-19 pandemic and the country's severest real estate downturn in history.

Visitors to the zoo at Dongshan Park pictured on September 14.

Local governments were forced to allocate billions of dollars towards widespread testing and implementing lockdown measures in order to uphold President Xi Jinping's zero-Covid initiative. This crisis in the property market, which consequently led to a significant decline in land sales, severely impacted their primary source of revenue.

Restaurants are being fined for serving cucumber without a license, and truck drivers are being penalized for transporting excessively heavy loads, as individuals resort to extreme measures to generate funds. The city of Wafangdian, where the zoo is situated, faced financial strain, resulting in delayed funding, according to a government employee quoted by state-owned Paper.cn.

A video shared by China Newsweek, an esteemed media outlet, featured a handwritten notice within the park premises stating that the staff had not been paid for six months. Regrettably, this lack of payment has resulted in inadequate provisions for the animals, who are now at risk of perishing due to starvation. CNN's attempts to verify this information were unsuccessful as the zoo did not respond to their inquiries. Nevertheless, news regarding the desperate condition of the animals quickly became widespread.

The Wujiang Bridge in the city of Zunyi in the southwest province of Guizhou on Nov. 24, 2021.

Ou Dongqu/Xinhua/Getty Images/FILE

Chinese cities are struggling to pay their bills as 'hidden debts' soar

The zoo's situation was finally resolved when the city government provided funds for salaries and food after the online appeal gained widespread attention, as reported by China National Radio. However, the increasing debt held by regional governments in China continues to pose a risk to the world's second largest economy.

According to Willy Lam, a senior fellow at The Jamestown Foundation, a think tank based in Washington, the borrowing amount, including the undisclosed debt issued by local government financial vehicles, could reach an estimated $9 trillion to $12 trillion. These financial vehicles are legitimate entities established by Chinese cities to bypass borrowing limitations imposed by the central government in Beijing. They are commonly utilized to direct funds towards infrastructure initiatives.

Arbitrary fines

Lam told CNN the situation appears to be "out of control."

Local governments use half of their income to cover the interest on their debt, leading them to resort to various methods of obtaining money, such as imposing severe fines on restaurants and other businesses. This was evident in June when three restaurants in Shanghai were fined 5,000 yuan ($685) each for serving shredded cucumber on top of cold noodles without the necessary license, sparking widespread outrage.

"This is an excessively severe penalty for a nonsensical motive," expressed a Weibo user, referring to Chinas equivalent of X, the platform that was once recognized as Twitter. "Why inflict harm upon the most vulnerable entities, which are the small businesses?"

Noodle sellers in Shanghai have been fined for adding cucumber to their dishes.

Aly Song/Reuters/FILE

"Cities are taking every possible measure to generate revenue," expressed another user. "Will we witness a rise in arbitrary fines?"

As per state-owned news outlet Jiemian, truck drivers in the central province of Henan raised concerns about the reliability of weighbridges used to inspect vehicles and their cargo in May. They were frequently penalized for surpassing weight limits.

A driver expressed dissatisfaction, stating that he had been issued 58 tickets in a span of two years, amounting to a sum of 275,000 yuan ($37,687).

According to an official from the local transport department, the financial resources of every county have been depleted due to the ongoing pandemic that has persisted for three years.

"The proper enforcement of the law and imposition of appropriate fines are crucial," stated the official. According to an article published on the central government's website, government inspectors discovered last year that officials in the southern city of Huizhou had falsified evidence to impose severe penalties on a trucker for illegally disposing of construction waste.

Fines economy

In 2021, an analysis of their budgets by Yuekai Securities revealed that over 15 cities in China experienced a remarkable surge of 100% or greater in the revenues derived from fines and confiscations.

Nanchang experienced a significant increase of 151% compared to the previous year, making it the city with the highest jump. Meanwhile, Qingdao, located in the east, raised an impressive 4.38 billion yuan ($600 million). According to Logan Wright, director of China markets research at Rhodium Group, the fines imposed reflect the desperation felt by localities facing fiscal distress. Local governments in China are burdened with the responsibility of providing social services, but they are unable to change tax rates or the distribution of tax collections.

The Chinese government's tax revenue has been progressively decreasing in relation to the size of the economy since 2015, and the pandemic has exacerbated this situation. CNN's analysis of government statistics reveals that overall tax income at all levels of government experienced a significant decline of 3.5% in 2022 compared to the previous year - the largest drop since China's tax reform in 1993.

Fueling anger

The central government appears to have been shocked by the surge in penalties meted out by local authorities.

Beijing issued a directive last year, prohibiting local governments from imposing "arbitrary fines" to generate revenue. Additionally, inspection teams were dispatched to ensure compliance with this policy. Despite these measures, the issue has not been resolved. In July, Premier Li Qiang, who assumed office in March, expressed his intention to address the problem of "arbitrary charges, arbitrary fines" imposed on private businesses.

Imposing arbitrary fines on small businesses to address financial shortfalls in local governments is considered unwise and counterproductive by Steve Tsang, the director of the SOAS China Institute at SOAS University of London. This approach can harm the economy, undermine business confidence, and potentially increase discontent with Beijing.

He mentioned that the magnitude of financial pressure faced by China's local governments is immense, to the extent that alternative methods of generating income can only address a comparatively minor deficit. Additionally, he stated that imposing arbitrary fines not only negatively impacts businesses but also diminishes the entrepreneurial drive of small business proprietors.

Whats 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.