According to the Financial Times 5 August 2026, the People’s Republic “has launched a global hunt of billions of dollars in unpaid taxes going back decades as Beijing seeks to fill a deepening fiscal hole by targeting the ultra-rich.”
Those who still consider China to be a socialist country may feel vindicated. Is this not surely decisive action against capitalism compared to anything that Burnham might consider doing?
Who are these ultra-rich Chinese, and how did they become wealthy right under the nose of a supposedly socialist government? What assets do they have and where are they tucked away?
The ultra-rich’s wealth stems from a combination of systemic corruption within the Party State and the unleashing of private enterprise in the past 3 decades, as the CCP regime made its decisive turn towards market capitalism in the 1990s. In 2026, China has overtaken the USA as the country with the largest number of billionaires.
In the new capitalist Wild East, whilst there are those like Pony Ma of Tencent and Jack Ma of Alibaba who are self-made billionaire entrepreuners, many relied on their family connections to influential cadres to make their fortunes. CCP membership doubled from 50 million in 1990 to over 100 million in 2026. Since 2001, the CCP has permitted entrepreneurs to become party members. CCP members have privileged access to government jobs and influential positions in media, education, trade and industry, banking - virtually every sector of society.
Privatisation of government land and other assets, plus easy credit, generated real-estate speculation, probably the main source of newly acquired assets for those who divested their fortunes based on property before the housing bubble burst in 2021, leaving most banks with severe bad debts.
Overseas assets of Chinese enterprises are estimated to be around $8 trillion, of which around $1.8 trillion are estimated to be the wealth of private individuals (well buried in off-shore trusts and shell companies).
There is a whole industry of advisers and brokers helping China’s nouveau ultrariche to get their capital out, investing in not just Hong Kong but right across the globe - from purchases of real estate, companies, precious metals, cryptocurrencies, global stock markets, even UK football clubs.
However, the regime has abruptly launched campaigns to retroactively tax overseas assets, levying a 20% tax on dividends and interest earned overseas, and to introduce reforms bringing the PRC’s tax system closer to... not socialism, but how the US taxes American taxpayers on worldwide income.
Tax authorities are working closely with Chinese banks to step up scrutiny of capital gains, going back as far as 2000, freezing bank accounts until satisfied that tax has been paid. Furthermore, controls restricting Chinese citizens from opening new overseas bank accounts and investment trusts are now strictly implemented and further tightened.
The government’s budget revenue has plateaued since 2021 at around RMB 21.6tn ($3.2tn). The sale of land leases, once a core revenue source for the regime, has slumped from RMB8.7tn (I.e. about 40% of budget revenue) in 2021 to Rmb 4.15tn (down to 20% of budget revenue). This fiscal shortfall appears to be the key reason for the regime’s attempts to tax the ultra-rich, many of whom are their own elite.
If taxing the ultra-rich is aimed at redistributing wealth to the most deprived 10% that would be welcome, although it is more likely that the regime will persist with its own agenda of sponsoring high tech development and subsidising exports, a dead-end strategy because of protectionist push-backs in G7 nations.
The Chinese economy has been in the doldrums since the massive debt-fuelled property bubble crashed in 2021 - with real GDP growth at around 1.5 to 2% rather than the officially published 5%. Discussion within the elite is now in the public domain.
Li Daokui, dean of the Academic Center for Chinese Economic Practice and Thinking at Tsinghua University, and former member of the Bank of China’s monetary policy committee, remarked on 11 July at the China Macroeconomic Forum that “the biggest problem facing China’s macroeconomy today is not K-shaped divergence, but that the economy as a whole is running cold - and this has already persisted for three years". Referring to the high-tech export boom diverging from rest of the economy, he adde “once we start talking about K-shaped divergence, it is as though we are placing our hopes on the upward arm of the K and expecting it to pull the entire Chinese economy forward. That actually leads us away from the real problem.” He further said:
• The real unemployment rate is 10.2%. (The official rate is 5%)
• Fixed investment has fallen by 4.1%. “The intensity and duration of the current decline exceed previous historical extremes (famine and split with the USSR in 1961 and the Cultural Revolution in 1967)".
“The overall judgment is that new drivers of growth have not yet been created, while the old growth engines of recent decades have already faded. Over the past 20 years, China’s rapid economic expansion has been driven primarily not by household consumption—whose share of GDP has been roughly 35 to 38 percent, excluding services consumption—but by two major engines. The first was large-scale infrastructure investment, sustained for nearly two decades and arguably the largest infrastructure buildout in human economic history. The second was the broad upswing in real estate, which unquestionably exerted an enormous pull on the economy.”
“Local governments were the main pillar of infrastructure investment. Our repeated calculations show that, in the past, local-government infrastructure investment plus routine expenditures averaged 41 percent of GDP each year, far exceeding household consumption and making local governments China’s largest source of economic demand. Infrastructure spending accounted for roughly 75 percent or more of local-government expenditures. Only a small portion went to routine operations; the bulk went to construction. From construction and building materials to migrant labour, land development, and the transfer of income to households through land development, the pull on the Chinese economy was enormous. Today, both real estate and infrastructure have stalled.” He goes on to remark that local government is mired in debt and real social expenditure lags escalating interest payments. “Local governments already rely on central fiscal transfers. If they do not borrow to repay debt, they struggle even to maintain normal operations, let alone pay interest. The more they issue new debt to repay old debt, the more the new borrowing exceeds the debt being retired, and the total stock of local debt continues to expand.”
“This produces the following situation: households are unwilling to borrow to consume; firms are unwilling to turn financial resources into investment; and the money borrowed by local governments circulates largely within the financial system, as new borrowing is used to repay old debt. This is the “blockage” visible in the financial dimension of the economy.”
“In the real economy, this appears as a decline in total local-government expenditure—including routine personnel and operating expenditures plus capital spending—from 41 percent of GDP to 35 percent. Capital expenditures have contracted sharply. At the same time, local governments are seeking money from companies in every possible way: clawing back previously promised tax concessions, collecting taxes in advance, and so on. Local governments have thus become a part of the economy that absorbs heat. A computer chip needs to dissipate heat to operate, but local governments have become 'heat absorbers' and energy 'black holes'. This is the fundamental reason the economy is running cold.”
“The economy as a whole is running cold. We should not focus only on the small segment that is still rising, because it cannot pull the entire Chinese economy forward.”
Such plain speaking without censorship is a clear indication that factional infighting over Xi’s attempt to secure a 4th term next year, amidst intractable economic problems, has loosened up public discourse.
Prof. Li’s solution - central government should issue more bonds to bail out local government, and encourage local government to manage more effectively - is wishing thinking at best, as local governments struggle to change past behaviours constrained by central directives.
Local governments have not been profligate, but merely trying to fulfil their quota towards GDP growth targets centrally set in advance by Beijing over the years. GDP growth, unlike in Western economies, resembles more like targets in Soviet-era central planning. Once useful infrastructure have been completed, borrowing more for additional investments on projects serving no real purpose and no returns have led to more debt.
The CCP under Xi Jinping is not using market adjustment mechanisms typically used in the West to dig itself out of a depressed economy. All bets that China’s GDP will overtake the US are off as it persists with a broken economic model.
Xi seems more concerned about the CCP’s control and survival above the economy and the welfare of the population. Profound disagreement within the Party, between conservatives favouring stronger overall state control and technocratic reformers favouring more autonomy for entrepreneurs and some concessions to the middle classes and civil society, has led to stalemate.
Regardless of how the Left characterised the former China under Mao, there is little doubt that today it is a particular form of a regime where not only is the proletariat severely exploited, but the Party State exerts an overbearing control over a capitalist class. The People’s Republic is constitutionally defined as a one-party monopoly. The People’s Liberation Army is not constitutionally under the control of the state, but is still, as it was before 1949, the armed wing of the Chinese Communist Party.
Xi Jinping has purged large numbers of senior cadres and generals in an ongoing anti-corruption drive. In January 2026, Xi has removed key top general Zhang Youxia as Vice Chairman of the Central Military Commission. 6 months on, Zhang has disappeared but is still officially a member of the Central Committee and Politburo, with no replacement nominated. This is highly unusual,. After Xi’s purges, most of the PLA hierarchy has remained vacant. Factional politics in the CCP is highly opaque, but the vacuum at the top of the PLA seems to indicate significant instability.
Is Xi’s CCP regime battening down the hatches in the face of its challenges, and reverting back to a Soviet-style top-down state-controlled economy, backed up with even more severe repression? Or will it abruptly change course, fundamentally break with its previous economic model and align closer to western-style capitalism as a way out?
For Chinese billionaires, the party appears to be over, for now. But is the party over also for Xi Jinping’s dreams of a 4th term?
References
FT: China launches global tax hunt going back decades
Li Daokuithe ultra-rich’s wealth stems from a combination of systemic corruption within the Party State and the unleashing of private enterprise in the past three decades, since the CCP regime made its decisive turn towards market capitalism in the 1990s. According to the UK-based research firm Hurun, China has overtaken the USA as the country with the largest number of billionaires (1,110 to 1,000).
In the new capitalist Wild East, some like Pony Ma of Tencent and Jack Ma of Alibaba are self-made billionaire entrepreneurs, but many relied on their family connections to influential cadres to make their fortunes. CCP membership doubled from 50 million in 1990 to over 100 million in 2026. Since 2001, the CCP permitted entrepreneurs to become party members. CCP members have privileged access to government jobs and influential positions in media, education, trade and industry, banking - virtually every sector of society.
One-off privatisation of government land and other assets, plus easy credit, generated huge real-estate speculation, probably the main source of newly acquired assets for those who divested their fortunes based on property before the housing bubble burst in 2021, leaving most banks with severe bad debts.
Overseas assets of Chinese enterprises is estimated to be around $8 trillion. Of that around $1.8 trillion is estimated to be the wealth of private individuals, well buried in a network of off-shore trusts and shell companies.
There is a whole industry of advisers and brokers helping China’s nouveau ultra riche to get their capital out of the PRC, investing in not just Hong Kong but right across the globe - from purchases of real estate, entire businesses, precious metals, cryptocurrencies, global stock markets, even UK football clubs etc.
However, the regime has abruptly launched campaigns to retroactively tax overseas assets, levying a 20% tax on dividends and interest earned overseas, and to introduce reforms bringing the PRC’s tax system closer to… not socialism, but how the US taxes American citizens on worldwide income.
Tax authorities are working closely with Chinese banks to step up scrutiny of capital gains, going back as far as 2000, freezing bank accounts until satisfied that tax has been paid. Furthermore, controls restricting Chinese citizens from opening new overseas bank accounts and investment trusts are now more strictly implemented and further tightened.
The Chinese economy has been in the doldrums since the massive debt-fuelled property bubble crashed in 2021 - with real economic growth at around 1.5 - 2% rather than the officially published 5%. Booming high-tech-led exports from small number of key coastal enterprises have masked overall deflation in most provinces. Deep-rooted and severe problems have resisted solutions.
The government’s budget revenue has plateaued since 2021 at around RMB 21.6tn ($3.2tn). The sale of land leases, once a core revenue source for the regime, has slumped from RMB8.7tn (I.e. about 40% of budget revenue) in 2021 to Rmb 4.15tn (down to 20% of budget revenue). This fiscal shortfall appears to be the key reason for the regime’s attempts to tax the ultra-rich, albeit many of whom are part of its own elite layer.
If taxing the ultra-rich is aimed at redistributing wealth to the most deprived 10% that would be welcome. More likely, the regime will persist with its own agenda of sponsoring high tech development and subsidising exports.
The CCP under Xi Jinping is not using market adjustment mechanisms typically used in the West to dig itself out of a depressed economy. Its growth model is broken, and all bets that China’s GDP will overtake the US are off.
Xi seems more concerned about the CCP’s own control of power and survival above the economy and the welfare of the country’s population. The profound disagreement within the Party, between conservatives favouring stronger overall state control and technocratic reformers favouring more autonomy for entrepreneurs and some economic and social concessions to the middle classes and civil society, continue to lead to a stalemate.
Regardless of how the Left have characterised the former China under Mao, there is little doubt that today it is a particular form of a capitalist regime where not only is the proletariat severely exploited, but the Party State exerts an overbearing control on the capitalist class. This state is constitutionally defined as a one-party CCP monopoly. Even more oddly, the People’s Liberation Army is not constitutionally under the control of the state, but is still, as it was before 1949, the armed wing of the Chinese Communist Party.
The CCP under Xi Jinping has purged large numbers of senior cadres and generals in its anti-corruption drive, which has gone on for more than a decade! Xi has removed key top general Zhang Youxia as Vice Chairman of the Central Military Commission in January 2026. Six months on, Zhang has disappeared but is still officially a member of the Central Committee and Politburo, with no replacement nominated. This is highly unusual, unlike other purges. After Xi’s purges, most of the PLA hierarchy has remained vacant. Factional politics in the CCP is highly opaque, but the vacuum at the top of the PLA seems to indicate significant instability.
Is Xi’s CCP regime battening down the hatches in the face of its challenges, and trying to revert to a Soviet-style top-down state-controlled economy, backed up with even more severe repression? Or will it abruptly change course, fundamentally break with its previous economic model, and align closer to western-style capitalism as a way out?
For Chinese billionaires, the party appears to be over, for now, or at least more subdued. But is the party over also for Xi Jinping?
References
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