A document released by the State Council, China's Cabinet, on Sunday, aimed at curbing arbitrary and excessive fines, has hit the nail on the head.

Imposing arbitrary fees and excessive fines might increase local fiscal revenue in the short term. But the loss obviously outweighs the gain, as doing so harms the local business environment and adds to the burden on enterprises. In 2023, a media survey in 38 towns in the Yangtze River Delta region found that the lower the intensity at which fines are imposed, the stronger the economy of a city is.

Yet, the revenue gained from fines belongs to nontax revenue, which can easily evade budget supervision. Thus, some local governments bank on the fines to increase unsupervised revenue.

In 2021, the media reported that about 62,000 vehicles were caught by one single camera breaking regulations at a junction in Foshan, Guangdong province, resulting in the total fines paid by the drivers exceeding 120 million yuan ($16.71 million). Such fines have become a reliable source of income for local government, having nothing to do with their initial purpose of reducing violations of traffic rules.

The document aims at resolving the issue. It stipulates that, by the end of this year, local governments must stop using illegal, irregular, and unnecessary law enforcement monitoring equipment. In addition, newly added monitoring equipment must also be reported to the higher authorities, so as to minimize the chance of electronic surveillance equipment becoming a tool to make money.

The document also establishes a mechanism for on-site inspection if the revenue from fines in a place is found "abnormal".