3.84 Million Enterprises Vanished in Half a Year, Yet Fiscal Revenue Rose by 4.7%? Both Figures Are True! This Is a Machine That Drains Blood Layer by Layer, Burning from the Thinnest Profit Margins Upward, Consuming Its Own Tax Base; It Will Burn Through the Red Line by October 2028. Once Enterprises Are Squeezed Dry, Your Wallet Is Next!

This article explores the phenomenon where 3.84 million Chinese enterprises permanently closed in the first half of the year, leading to mass business disappearances, while general public budget revenue still grew by 4.7% year-on-year. By deconstructing the fiscal accounts and statistical logic of the Chinese Communist Party (CCP), it analyzes how enterprises are drained layer by layer from low-profit to high-profit levels, pointing out that this fiscal blood-sucking machine is ultimately burning its own tax base, and predicts that it will burn through the red line in October 2028.

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When an entity starts recording tomorrow's money as today's revenue, it only means one thing: today's money is already completely insufficient to cover expenses.

Observe things as they are, and refuse to accept casual perceptions. Let's first present two figures, both from the first half of this year, which seem incompatible but are actually both true. The first figure is the number of enterprises that have actually and permanently ceased operations nationwide, which, when extrapolated, is approximately 3.84 million. In just half a year, over 3.8 million enterprises simply vanished. The other figure is that China's general public budget revenue grew by 4.7% year-on-year. Yes, it is still growing, but under what circumstances is it growing? It is growing while enterprises are disappearing in batches, and fiscal revenue is still rising. I believe everyone feels the same as I did when first seeing this data: how can these two things happen at the same time, and both be true? This episode will answer this one question, and the answer is even more cruel than you think. This is not data clashing; this is the way the CCP operates its indiscriminate fiscal blood-sucking machine. Its function is to eliminate enterprises layer by layer starting from the bottom, while simultaneously continuing to accelerate the draining of blood from the surviving enterprises. Let's imagine this as a building. Today, we will unfold the blueprints of this building, look at the order of the blood-sucking, and see the respective ways each floor dies. Furthermore, you will see how this building catches fire and how the fire spreads from one floor to another. In the end, you will see a very, very ridiculous paradox: every floor this fiscal machine burns is the fiscal system's own tax base. It looks like it is the enterprises being torn apart, but in the end, it will definitely be the fiscal system that is torn apart.

Let me first explain the source of this huge number to prevent people from accusing me of spreading rumors. 3.84 million—this is not a figure released by the Chinese Communist Party (CCP). The CCP simply doesn't publish data on business de-registrations anymore. This number was derived through three independent analytical paths. What does the first path look at? It looks at the stock identity equation of industrial and commercial registrations. This is very easy to understand: take the number of registered enterprises at the beginning of the period, add how many were opened afterwards, and subtract how many remain at the end of the period. After factoring in the queue waiting time between suspension and de-registration, this path yields 3.78 million households. What is another path? Looking at the business survival rate, which overlays historical patterns of how long businesses survive with current pressure factors, yielding 3.62 million households. The final path works backward from the employment side: under the condition of an overall unemployment rate of 11% and the real youth unemployment rate pressure scenario of 25% to 30%, how many businesses need to vanish to match this figure? I have already calculated this 11% to 30% figure for everyone. You can check the previous program. This path deduces 3.97 million households. The numbers calculated by three completely different paths cluster in a very, very narrow range, with a median of 3.84 million, and a 95% confidence interval between 3.08 million and 4.61 million. Fragmentary local data can also serve as circumstantial evidence. For example, Beijing opened 100 new enterprises last year and de-registered 43; Nanjing was even more brutal, opening 100 and de-registered 58. These only count those that completed the paperwork; there are also those that wanted to die but couldn't, meaning they are still playing dead.

Here, there is also a figure for the earliest stage—those that completed all de-registration procedures and were officially removed from the registry. There are only about 3.02 million such enterprises, leaving a gap of about 800,000 from the 3.83 million figure. This 800,000 is not an error; it means the businesses are already dead, but their funerals haven't been completed yet. What do these enterprises have to go through? First, business suspension, then tax reconciliation and clearance, and only then comes de-registration. The queue on this assembly line is very long now. What does it mean for over 3.80 million enterprises to exit in half a year? The total scale of registered enterprises in China is only about 65 million, so 5.5% was directly wiped out in half a year, and the annualized exit rate exceeded 11%. However, this cannot be directly equated to the tax base dropping by 11% in a year, because fallen enterprises are highly concentrated in certain types: micro-enterprises, low-invoicing businesses, or those that didn't pay much tax to begin with. At the same time, newly opened ones are replenishing the pool. Therefore, when calculating the CCP's fiscal accounts later, the tax base loss is estimated at the 3% per year tier rather than directly converted using this enterprise count. Rest assured, I won't smear the CCP. Even without smearing the CCP, simply stating some facts is far more brutal than smearing it. Because what the CCP does is truly ruthless, everyone can rest assured on this point.

Well, after explaining the enterprise side, let's look at how the 4.7% on the fiscal side came about. China's fiscal accounts have several books, and political propaganda only ever recites the first one: the general public budget. This particular book grew by 4.7% in the first half of the year, which sounds quite decent. There is also a government-managed fund account. Previously, the main income in this account came from land sales. This account dropped by 21.5% in the first half of the year, and this decline continued on top of a very, very dismal low base last year. Land sales revenue alone dropped by 31.5%. If you put these two books—public budget revenue and government-managed fund revenue—together, their total revenue only grew by 0.95%, failing to even reach 1%. Let's look one layer deeper: land revenue was 449.3 billion less than the same period last year, while the general budget took in 5,481 billion more overall. The money lost from land sales directly ate up 80% of the extra revenue that the general budget painstakingly collected. Where did the extra 500-plus billion come from? Today, acting as a data husky, I will tear apart the CCP's garbage accounts to the very end. To summarize what happened: led by the value-added tax, followed by personal income tax, import-stage taxes, corporate income tax, and securities stamp duty, these five taxes combined contributed 602.3 billion, which is more than the entire incremental growth, accounting for 11%. This means that other tax categories were collectively dragging down the hind legs. For instance, real estate-related deed tax and land appreciation tax together dragged it down by over 70 billion, while export tax rebates offset another 68.5 billion. The most glaring among the five taxes is the securities stamp duty, which skyrocketed by 97.3%, cushioned by the real money and silver turnover of stock investors. The daily average trading volume of A-shares in the first half of the year was in the 200 to 300 billion magnitude. So savor this structure: what did the growth of fiscal revenue rely on? Stock market transactions, imports, and a few profitable top-tier industries. The most crucial factor is what? Regulatory enforcement became even harsher than before. It can be said to have almost nothing to do with the lives of tens of millions of micro and small enterprises.

So the question is, what is wrong with the data of the Chinese Communist Party (CCP)? Actually, the problem doesn't lie in the falsification of the total numbers; in fact, this set of data tells us something far more serious than just fabricated totals. Where is the seriousness? It lies in the fact that the entire statistical logic of the CCP has fucking crashed, and this crash was even intentionally designed—every single part of it is designed with extreme care. Oh, let me go through it one by one. Where is the first crash? It's in the denominator. Look at what the CCP's regulatory authorities publish these days: what are they? Things like how many tens of thousands of new enterprises were established. But how many were deregistered? How many had their licenses revoked? How many didn't issue a single invoice for six consecutive months? How many units stopped paying social security? The CCP never provides a single consolidated sheet to cross-check these. They always make you see the entries, while forever obscuring the exits, and making it even less possible to see those whose licenses are still hanging on the wall while the people behind them have long since scattered into empty shells. Therefore, what is being hidden is not just a number, but the denominator of the activity rate. Where is another point of crash? It's at the threshold. Industrial statistics above a designated size only cover enterprises with operating revenue exceeding 20 million. Once an enterprise dies or falls below this threshold, it disappears from the sample. Whatever you have left are survivors, and the average score of your survivors will naturally look good. What is this? This is typical survivorship bias. Statistical agencies should strive to avoid this kind of survivorship bias, but the current statistical logic of the CCP is striving for and even magnifying this statistical bias. So the bad news isn't deleted; it is systematically squeezed out of everyone's field of view. The final crash happens at a specific point in time, and this one has solid, concrete evidence. How is it written in black and white in the National Audit Office's own report? It says this: they over-collected or pre-collected 40.4 billion in taxes, and 21 provinces used treasury funds to first record expenditures and then transfer them back. Through such methods, they artificially inflated 596 billion. Adding these two items together makes over 100 billion. In fact, placed under the backdrop of the entire fiscal situation, oh, its proportion itself is not large—accounting for less than 0.5% of the CCP's total revenue—but its signaling effect is enormous. What does this prove? It proves that the pressure of fiscal targets has already rewritten the timing of tax collection and officially confirmed it. What does this reflect? Oh, let me ask everyone a question. Let's not think about the affairs of this country for a moment, let's just think about the affairs of a single enterprise. When an enterprise begins to record unconfirmed revenue as liquid assets on a large scale, would you say this company is far from a financial explosion? I can give you two examples, and everyone will understand very clearly. In the capital markets, this set of moves has a clear name: it is confirming unearned revenue ahead of time into the current period, and then spinning the funds around in a circle to flow back and inflate the cash flow—which happens to be two classic methods of financial fraud. I can put it this way: what the CCP is playing with now are the leftovers from what Enron played back then. How did Enron play it back then? They discounted all the expected revenue of future energy contracts into current revenue and entered it into the books. At its peak, Enron's market value was over 70 billion US dollars, but it took only a few weeks from the auditors turning hostile to bankruptcy liquidation. Luckin Coffee played the second trick, which was using fake transactions to conjure up billions in cash flow out of thin air, and then got nailed to the delisting board by a short-seller with a single hammer. But when the exact same accounting action is transferred to fiscal matters, the names all change, becoming things like 'over-collection' or 'completing revenue targets ahead of time.' What the fuck, you can complete tax collection ahead of time? Then if tax collection in a city is advanced to 90 years later, does that count as completing it 100 years ahead of time? The funds you first record as expenditures from the treasury and then transfer back are called 'overall coordination and scheduling.' What the fuck, Luckin and Enron—the CCP is using both methods now. Everyone must remember an accounting theorem: when an entity starts recording tomorrow's money into today's ledger, it only means one thing—that today's money is completely not enough to spend. The act of pre-confirming revenue has always been the most, most honest confession that cash flow has run into trouble. If an enterprise does this, it's called the eve of a financial explosion; when the fiscal sector does it, the effect is actually the same. Therefore, the statistical logic of the CCP itself is now even more terrifying than the entire fabrication.

In addition, there is a half-stalled situation hidden within the profit distribution. In the first half of the year, profits for industrial enterprises above designated size rose by nearly 20%, which sounds quite prosperous at first glance. But if you peel back the layers, you find that the optoelectronic equipment industry alone contributed 75% of the total profit growth. On the other hand, automotive profits fell by 20%, steel by 40%, and non-metallic minerals were cut in half. The growth is concentrated in a very small number of top-tier sectors, driven by subsidies and the dividends of artificial intelligence. However, the decline is widespread. Putting it all together, the conclusion is simple: the Chinese Communist Party (CCP) is currently hiding a massive amount of systemic risk. The more than 3.8 million enterprises that died in the first half of the year represent the portion of systemic risk that the CCP has covered up. You might be wondering, how exactly is this building burning? I have categorized national enterprises into four tiers based on their profit margins; the fire started at the very bottom and is burning upward, layer by layer. And the way they die at each level is different. The first tier consists of industries with profit margins of less than 2%, such as steel, which is now at only 0.6%, furniture at 1.5%, non-metallic minerals at 1.6%, and agricultural byproducts at 1.9%. How thin is the margin for survival at this level? You can see it clearly if you do the math. If the damn CCP extracts even 0.5% of their revenue, the profit of the steel industry would immediately be slashed by 83%, and the profits of furniture and building materials would drop by 54%. A 0.5% extraction is a catastrophic blow. Therefore, the way the first floor dies is the most direct: first, they default on social security, then on wages, then on suppliers, and then they switch to zero-tax reporting to play dead. If they can't hold on, they just shut down and leave. The 3.8 million-plus enterprises that died in the first half of the year are mainly from this tier. There is another way of dying on this floor that isn't reflected in the deregistration data, which is deindustrialization. Peking University has tracked small and micro enterprises for 23 quarters; the proportion of self-employed individuals with zero employees has soared from 24% four years ago to 53%, while those with five or more employees have shrunk from 25% to 12%. Nearly 70% have no business registration at all. What is this? It's just the bosses rolling up their sleeves and doing the work themselves. What is the situation here? The business license might still exist, and the stall might still be propped up, but as an enterprise, a tax-paying unit, or a social security unit, its substance has vanished—it has completely evaporated. This type of evaporation cannot be captured on any CCP chart.

The second tier consists of industries with profit margins between 2% and 4%. For example, the automotive industry currently has a profit margin of only 3.4%, and the average for private industry is just 3.9%. The second floor is slightly better than the first, but only by a breath, and that is achieved through cost-shifting: dragging out payment terms with upstream suppliers, squeezing prices for downstream buyers, cutting dealer rebates, and finally, laying off staff. A typical example is BYD. The fingerprints of this cost-shifting are already printed on the financial statements: accounts receivable for industrial enterprises above designated size have risen by 7.7%, completely outpacing the 5.5% growth in operating revenue. As you can see, the collection period is also lengthening. In other words, China's entire supply chain is currently replacing cash with credit. Whoever has the longest payment terms is essentially giving blood to others. This is the cause of death for the second floor; therefore, it is slower than the first floor, but also more painful because it involves a longer chain and more people. How does the first floor die? It stops breathing on the spot. The second floor is bled dry by the entire supply chain in turns.

On paper, they might still be alive, but their cash flow is already being used to pay for the funeral expenses of the whole building. This includes one of the largest and dirtiest accounts: the CCP and large enterprises dragging out payments for construction projects and goods owed to private enterprises. Why is this inherently wicked? It is because they are forcibly turning fiscal holes into corporate holes, making enterprises provide interest-free loans. The third floor houses the main manufacturing sectors with profit margins between 4% and 7%, such as the electronics industry with an average profit margin of 5.6%, chemicals at 6.3%, and electrical machinery at 4.1%. After the first floor is wiped out, the eyes of tax authorities and local governments naturally turn to this level, because this floor can still issue invoices and has assets that can be squeezed; at the very least, there is still some cash flow on the books, so they become a primary pool for taxation. The risk-resistance capacity of this floor is slightly stronger. For example, if you extract 0.5% of their revenue, they will also lose profit, but not as dramatically as the first floor. The decline for the first floor is over 80%.

As for the third floor, their profits will only drop by 8% to 12%. It is not enough to kill them on the spot, but it is enough for the boss to cut capital expenditures, R&D, and hiring. The 8.5% drop in private investment is a major manifestation of the third floor collectively retreating into a defensive posture. The defensive posture of the third floor is itself fuel for the next round of fire. When capital expenditures are cut, it hits the orders of the second floor; when hiring is frozen, it chokes the income of the residents. The more the third floor tries to protect itself, the fiercer the fire will burn downstairs. So, what is the fourth level, or the top floor? The top floor is home to industries with profit margins of over 7%. For example, the profit margin for pharmaceuticals is 13.7%, beverages 16.3%, and mining 21.3%. However, more than half of these are state-owned enterprises (SOEs) or resource-monopoly industries, or industries with entry barriers designed specifically for white gloves. Oh, when it comes to the top floor, the whole approach changes. How do they extract? First, they make the SOEs pay more dividends; in plain terms, they take the nest egg saved in the corporate accounts and spend it.

Last year, the operating budget revenue of state-owned capital rose by 25%. How much did the central government's portion rise? It rose by 73%. Note that this is not meat grown from the tax base; it is the invisible, undistributed profits stored in the enterprises that were sliced off like fat to be consumed. This is a one-off extraction, and for those private, semi-official industries on the top floor, this approach is a real killer. First, there is the increase in resource taxes, followed by special revenue levies, and then a sweep of consumption taxes. But there is an essential difference between the top floor and the floors below: the enterprises downstairs have thin profit margins and very weak pricing power, so if they are squeezed, they have to swallow it. But the top floor is monopolistic; it is a toll booth, and it holds the pricing power granted by the government. Whether dividends are extracted or taxes are increased, they can immediately pass the bill down to the downstream by raising prices on medicine, tobacco, alcohol, or water, electricity, and gas. So, the fire burning on the top floor is ostensibly about the CCP.

It targets a few monopoly industries, but in reality, not a single penny of these costs will stay on the top floor. Instead, they will all be channeled through the pipe of pricing, pushing the price pressure outside the building. This is the way of shifting costs entirely. At the same time, these four floors are not burning independently; there is a very, very interesting circular fire path in between. Look, for example, if the first floor exits, it affects the bad debts of suppliers and banks, which will surface first. This spark will burn along the accounts receivable to the second floor, and the second floor's cash recovery will immediately slow down. What can they do? Only cut investment and cut people. As employment shrinks, the personal income tax base of residents will be damaged accordingly. When the fiscal authorities see that enterprises are fucking unable to be squeezed anymore, they turn and press the pressure onto the top floor and asset holders. Isn't the current 20% recovery of overseas trusts just a result of this? The top floor will either cut investment or raise prices, and demand will shrink another round, and the fire will return to the first floor, then burn the next batch with the thinnest profits. So, think about this closed loop: what is it?

Without the CCP's shifting of gains, whatever they can put into the treasury this year, they will fucking stuff it in as hard as they can. But the damage to the tax base is lagging; it will only manifest next year or even the year after. So every person in charge has the incentive to turn up the fire a bit more. Anyway, by the time the building fucking collapses, they will have already run away. Even if they don't fucking leave, they can temporarily alleviate the predicament they are currently in. Now, let's shift the camera and see how this chain tears apart the CCP's fiscal situation. This year's general public budget revenue is just over 22 trillion, which is about 460 billion more than last year in reality. Let's build a pressure formula for this target, assuming other revenues don't help, and press the entire gap onto the tax categories related to enterprises. So, how does the CCP intend to maintain this 22 trillion target? Before giving this target pressure formula, let's fix the baseline. Last year, the taxes directly linked to enterprises, namely value-added tax and corporate income tax.

Combined, the actual collection was about 13 trillion. We will take last year's actual collection as a benchmark, meaning it is the zero mark. What the formula needs to measure is how many percentage points the CCP needs to tighten above this line to make up for the gap from the existing tax base. What is the other data involved in the calculation? It is that under current economic conditions and the CCP's predatory taxation, the tax base naturally shrinks by 3% every year. Note that I am calculating this in the most conservative way. In China's current deflationary spiral, the natural shrinkage of the tax base by 3% is actually an underestimate. Based on the 13 trillion collection volume, every point they tighten above the line equals an extra 130 billion deducted from enterprises every year.

Alright, now let us start calculating. Assuming other revenues do not help and the entire shortfall is pushed onto corporate-related taxes, then for China to stick to this budget target, it would have to tighten the baseline by six to eight percentage points in the first year, tighten it to 10.1 in the second year, and then a year after that—the year after next—it would have to push it all the way to 13.5%. Where is the ruthlessness in these numbers? If you convert an intensity of eight percentage points into money, it is just over 1 trillion RMB, which, when spread across the grand pool of corporate revenues nationwide, is roughly the 0.5% point I mentioned just a moment ago. And what does this half a point mean? As we just calculated from the chart of the four floors, the steel profits on the first floor are directly shaved off by 83%, and profits on the second and third floors will also be squeezed by 10%. Therefore, this 8% line is not something someone dreamed up on the spot; it is worked backward from the profit buffer of the four floors. Tightening past these eight percentage points is enough to burn through the first floor, and then the second and third floors will also suffer collateral burns. So mathematically, this is no longer called collecting taxes; this is called squeezing enterprises.

Do not exit! Now let us check the alignment: we are just a fingernail away from the 80% red line. The following year, it has to be tightened to 10.1%, which already crosses the line. Let us interpolate again: the moment of crossing the line falls at around 1.4 years, which is approximately October 2028. This is the origin of the 1.4-year timeline; it is measured by drawing a line right between 6.8 and 10.1. Even if we take a step back and the Chinese Communist Party no longer pursues this budget target, and only pursues what? Only pursues that last year's actual revenue does not decline nominally, then this crossing moment will be pushed back by two and a half years—still only a two-and-a-half-year window. But given the CCP's nature, it will not push it back; it will only rush it forward. Once the corporate end is squeezed dry, you do not even need to guess the subsequent sequence; it is determined by two variables: the speed of effectiveness and political visibility. Because at every step, the CCP will choose the fastest and least conspicuous option at the moment, and once those are exhausted, it will be forced to move on to the next. First, it will pull out the syringe: things like investigating and making up for historical tax arrears, retroactively collecting social security, and all sorts of fines and fees, getting all tax revenues deposited into the treasury in advance to balance the audit.

Among them, that 100-plus billion is a solid proof; this path is destroying its own tax base because what it is pre-advancing is next year's revenue. And what is this hand doing? It is accelerating the exit of enterprises! The harsher you levy, the less there will be available to levy next year. This collection drive, having barely sustained one or two years, will immediately hit a ceiling. And what will the CCP do then? It will turn to party-owned assets, demanding that these party enterprises increase their profit remittances or dispose of assets, collecting one-off gains anyway. Last year, the net budget revenue of party-owned capital rose by 25%, and the central government portion rose by 73%. In fact, the CCP has already reached this step, and the flaw is equally very clear: they are all one-off. While you are selling off assets, the future dividends attached to those assets also vanish along with them. This will lead to the CCP's revenue today being traded for an even larger gap every single year hereafter. In the end, after this part hits its ceiling, what happens? The only tax sources of sufficient scale left are residents—meaning expanding the consumption tax to the retail sector, tightening the collection and administration of personal income tax and capital gains, and then adjusting and raising utility prices like water, electricity, and gas.

Over-collecting your social security, medical insurance, and other fees? Look at that: in the first half of the year, how much did personal income tax rise? 13%, and stamp duty directly doubled—it is already being initiated. And what is the constraint of this part? It lies in the residents themselves, who are simultaneously the demand side. Every single yuan reduction in residents' disposable income will passively lead to a corresponding reduction in consumption and corporate revenue, and your tax base will shrink by another circle. But if you blindly add taxes on the resident end, what will it do? It will increase the public's sensitivity. This is also where the CCP's political cost is highest. Therefore, I judge that the CCP will definitely proceed in small doses. Also, people might wonder why, the more other countries issue government debt, the higher their treasury revenue, yet the CCP's revenue gets lower the more it issues? We must understand that debt does not generate revenue; it can only postpone the constraint. To keep issuance costs under control, what did the CCP choose? Lowering deposit interest rates and requiring banks to hold government debt, which is typical financial repression. The essence of financial repression.

It bypasses the legislative procedure—of course, the CCP does not have a legislative procedure anyway. The essence of financial repression is bypassing the legislative procedure, spreading the cost among all depositors, and levying a savings tax on the resident end. As for the conclusion, it is very clear now, isn't it? Everyone can apply this chart to the enterprise where you are employed, or if you yourself are a business owner, you can just see which floor you can hold out to. If you still have profits beyond this limit, then keep going. If your industry's profits are sitting on the second floor or even the first floor, then there is truly no need to keep playing.