In January, superstar Chinese film director Zhang Yimou was fined the equivalent of $1.24 million for having three children in excess of the country’s strict, so-called “one-child” family planning standards. It was a significant, possibly record fine, meant in theory to compensate the state for the social and material costs associated with those pesky, extra three lives.
This raises an interesting question: What happens to Zhang Yimou’s $1.24 million? Or more importantly, what's happened to the estimated 2 trillion yuan ($320 billion) in social maintenance fees that millions of other Chinese parents have paid since 1980, according to one study? On Thursday, a court in Guangzhou fine that the Family Planning Commission of Guangdong Province -- China’s most populous -- must disclose the specifics of its own data within 15 days.
This isn't the kind of information such bodies are eager to reveal, and Guangdong's commission strongly fought the lawsuit demanding that they come clean. They have good reason to resist greater transparency. Last year, for example, Guangdong’s Family Planning Commission claimed to have collected 1.456 billion yuan ($235 million) in “social compensation fees." The province’s Department of Finance, on the other hand, reported that collections amounted to 2.613 billion yuan ($421 million).
What accounts for the difference? Specifics will have to wait until the Family Planning Commission gets around to disclosing details. But the issues are already well-known in China, where such bodies employ more than ruled, and often serve as critical revenue generators for cash-strapped poorer provinces.(Local governments enjoy wide latitude in assessing fines, and generally do so on the basis of income.)
The problem, according to Chinese media reports, is that quite a bit of that revenue doesn't seem to land in government treasuries. In rural Yunnan Province, for example, audits suggest that in one county as little as 10.18% of social compensation fees flowed into government coffers. In Chongqing, 68 million yuan ($11 million) worth of social planning fees failed to find their way to the treasury.
Needless to say, the stench of corruption hangs heavy over such discrepancies. In Yunnan, officials were found to be using social maintenance fees to pay for personal expenses, including medical bills. In some regions, local authorities allow officials who collect the fees to 500,000 people a certain percentage of them. The situation -- whereby officials are incentivized to hunt down children for their revenue-generating potential -- is both untenable and perverse.
It is also entirely contrary to China’s family planning goals under President Xi Jinping who has transformed the “one child” policy to allow Chinese parents to have second children under certain circumstances. The need is pressing: Three decades of population control has left China with a rapidly aging population and not enough young workers to support them. Under such circumstances, it’s counter-productive (as well as deeply unpopular) to allow thousands of bureaucrats to roam China in search of family planning violations.
Indeed, as early as March 2013 -- just a few months into Xi’s term -- he began to keep the power of China’s national Family Planning and Population Commission by merging it with the Health Ministry and stripping it of several traditional responsibilities. Still, in contemporary China, nothing signals the end of a government career -- even a powerful one -- quite like undermine of one’s finances. After operating for decades in the darkness, China's family-planning agencies are about to learn how much harder it is to work out in the open.
(Adam Minter is a regular contributor to Bloomberg View based in Shanghai and the author of "Junkyard Planet," a book on the global recycling industry. Follow him on Twitter at @AdamMinter.)
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