Beijing seeks to curb ‘shakedown’ detentions of Chinese executives

China’s central government is trying to curb a spate of detentions of business executives by local authorities that are raising concerns among entrepreneurs and risk undermining efforts to boost economic growth.

A review of filings by the Financial Times found that senior figures from more than 80 companies listed on the Shanghai and Shenzhen stock exchanges were detained in 2024.

ChinaIts securities regulator requires companies to list the arrests of controlling shareholders, chairs, chief executives and other top executives, and the numbers suggest a wider crackdown on executives across the country.

Some of the detentions appeared to have little or no legal basis and in many cases were carried out by authorities far from the targeted business activities, a practice Chinese media called “long-range fishing”. A leaked official document from the southern province of Guangdong said thousands of companies in a single city were targeted for action by authorities in other regions from 2023.

Premier Li Qiang this month called for stronger oversight of company-related law enforcement, saying the government would review areas with fines and confiscations or abnormal revenue growth from high levels of enforcement outside their jurisdiction.

“Incidents of abuse of administrative discretion and cases of unfair enforcement continue in certain areas and sectors,” Li said, according to the official Xinhua news agency. The prime minister added that it was imperative to address “pressing issues raised by citizens and businessmen”.

Analysts said the high number of foreclosures could be linked to the deteriorating finances of local governments, which have suffered from reduced revenue from land sales. Nationwide property crisis This has also slowed China’s economic growth.

“My friends are being squeezed from all sides,” said one top Chinese investor, who claimed some local governments were reviewing residents’ assets to target the wealthy with fines.

The investor, who declined to be named and was forced to pay local authorities to be released from detention nearly a decade ago, said some areas had turned to “long-distance fishing”.

“I accuse you of trespassing in my territory and come and take you and pay you,” he said, describing the attitude of local authorities. “It’s like a nationwide shake-up.”

About half of the 82 listed company-related detentions in 2024 were reviewed by FT relevant authorities from another region or an unspecified location.

Eugene Weng, a lawyer at Shanghai-based Wintel & Co, said some of his clients had experienced abusive law enforcement by authorities in other areas, adding that such practices were Loss of confidence In the business environment.

“The sense of anxiety is beyond imagination,” Weng said. “Entrepreneurs are only thinking about the short term, making profits as soon as possible instead of investing in their business and transferring funds abroad as soon as possible.

“It actually hurts tax revenue and employment,” he added, “putting local finances into a vicious cycle.”

An internal report prepared for Guangdong provincial leaders in April, which was later leaked online, said cross-jurisdictional enforcement had ensnared a growing number of local companies.

The report states that as of 2023, “about 10,000 enterprises in Guangzhou City faced enforcement from other regions, most of which involved private enterprises and had a rather clear profit-seeking motive”.

A Beijing-based entrepreneur says the detentions have created an atmosphere of fear among founders. “It becomes terrifying when you start getting to know the detainees,” he said. “The government needs to do something.”

China’s opaque enforcement system exacerbates these concerns. The companies said they and the families of the detained officers received little information about their cases.

The board of “smart city” solutions provider Zhejiang Voice Technology struggled to respond to a demand from securities regulators in March for more information about the detention of Chief Executive Ye Jianbiao.

In a filing, the board said that aside from a notice from another city’s anti-corruption bureau that Ye was “under investigation for work-related crimes,” neither it nor Ye’s family had “received any other formal notice or document,” nor had they. “Aware of the progress or conclusion of the investigation”.

Nine months later, the 51-year-old executive remains stuck. You could not be reached for comment. A company representative said they have no further information on Ye’s case and will make an announcement as soon as he is released.

Some provinces have launched advocacy efforts to protect private companies. Prosecutors in eastern Zhejiang revealed last month that local police helped thwart the kidnapping of an entrepreneur named Shen by officers from another area.

After being kidnapped from his home, Shane flees from the police while being taken out of the province. Zhejiang police then arrested two out-of-town officials, who initially claimed they were acting on orders from their superiors, and were eventually imprisoned.

In some cases, detention officers ended up in the hands of authorities in areas where they did not seem to have any business.

Zhang Jian, 55, has spent more than two decades building Aima Technology Group into one of China’s largest electric scooter manufacturers. His family’s 73 percent stake in the group is worth about Rmb19.5bn ($2.67bn), putting them at number 247. China “Rich List” Compiled by the research group Hurun.

But in October, Aima announced that Zhang had been detained by anti-corruption squads in Chengdu, hundreds of kilometers from his home and company headquarters in Tianjin. Aima has no assets in Chengde, according to public filings.

A manager of Aimar, who did not want to be named, said, “They say it’s his personal matter but won’t tell us anything else.

The manager said Aima was able to send important company documents to Zhang to sign from detention and they hoped she would be released soon.

The manager said, “Many of the detained chairmen are released within two to three months. “I can’t say how long we’ll be there, but that’s the state of the market.”

Data visualization by Haoxiang Ko