A deep-dive companion to They Kept the Flag, They Took the Assets
In November 2020, Ant Group was forty-eight hours from pricing the largest IPO in human history — a $37 billion listing that would have valued the company at over $300 billion, making it larger than most of the world’s major banks.
Jack Ma had given a speech in Shanghai the previous month criticizing China’s state banks as “pawnshops” running on outdated systems, ill-suited for modern innovation. He compared global financial regulators — including, implicitly, China’s — to an old men’s club that didn’t understand technology.
The IPO was pulled two days before pricing. Regulators issued new rules that would have gutted Ant’s valuation. Ma disappeared from public view for months. His picture was removed from a business reality show he had been hosting. An Alibaba spokeswoman, when asked by TIME about his whereabouts, declined to comment.
Ant Group has lost roughly 75% of its value — over $230 billion since the scuttled listing. The winners from Ant’s suppression? China’s state-backed banks — the same institutions Ma had called pawnshops.
The lesson: in China, you don’t criticize the toll booth. The toll booth is the government, and the government is the party, and the party does not distinguish between economic and political threats to its authority.
Why This Is the Hardest Argument
China is the most challenging case in this series for a specific reason: the Chinese Communist Party is still a functioning ideological apparatus, and the CCP’s economic management has, by many measures, been extraordinarily successful. China lifted close to 800 million people out of poverty in forty years. Its infrastructure is world-class. Its technology sector, until recently, competed with global leaders. The country’s GDP grew at double-digit rates for decades.
This complicates the oligarchy argument in a way that Iran, Venezuela, and Russia don’t. Those three cases show regimes that clearly failed to deliver economic outcomes for ordinary citizens while enriching a small connected network. China’s story includes genuine economic development alongside the elite capture.
The argument here is not that China is impoverished. It’s that the asset map — who actually controls the commanding heights of the economy, and on what terms — reveals the same underlying structure as the other three cases. The development was real. The conditional tenure was also real. Both things can be true.
The Party as Toll Collector
The CCP is not communist in any functional economic sense. It does not own all property, mandate collective agriculture, or suppress market mechanisms across the board. What it does — systematically, at scale, in every sector that matters — is control access to capital formation.
To build a major real estate development, you need land allocation decisions made by local party officials. To launch a fintech platform at national scale, you need licenses issued by regulators whose careers are managed by the party. To take a company public, you need approval from bodies whose leadership serves at the party’s pleasure. To operate in sectors the party has designated as strategic — telecommunications, energy, finance, advanced manufacturing — you need relationships that function like the toll on a road: pay them or find another route, and there is no other route.
The evidence for how this actually works is not theoretical. A 2019 study published in the Quarterly Journal of Economics found that when firms linked to members of the Politburo — China’s roughly 25-person ruling committee — purchased land from local governments, they paid a 55-60% discount compared to unconnected buyers. Members of the 7-person Politburo Standing Committee, the innermost circle, received an additional 17-20% discount over regular Politburo-connected firms. The same study found that Xi’s anti-corruption campaign, which began in 2012 and has imprisoned or removed hundreds of officials, produced only a small decline in these discounts. The toll didn’t disappear. The rates adjusted.
The practical implication: CCP membership is the toll, and senior party relationships are the discounted E-ZPass. The country’s most successful entrepreneur, Jack Ma, understood this — he cultivated party relationships assiduously, added state investors to Ant Group’s cap table, and planned the STAR Market listing as a gesture of political compliance. It wasn’t enough, because the specific investors in Ant — including relatives of former CCP general secretary Jiang Zemin — represented a rival faction that Xi wanted to neutralize, not protect.
This is the subtlety the model has to account for in China: the anti-corruption campaign is not a deviation from the oligarchic structure. It is the oligarchic structure operating normally — the dominant faction using anti-corruption as a mechanism to redistribute commanding-heights positions from rivals to allies. The structure stays. The occupants rotate.
The Princelings and the Asset Map
The princelings — children and grandchildren of the CCP’s founding revolutionary generation — represent the most visible expression of hereditary elite capture in China’s political economy. Xi Jinping is himself a princeling, the son of Xi Zhongxun, a significant figure in the PRC’s founding years.
The princeling network holds significant positions across technology, finance, and real estate — not through public appointments, which would be visible, but through investment vehicles, private equity firms, and equity stakes structured through multiple layers of intermediaries. The Ant Group situation illustrates the opacity: among the investors identified behind Ant’s ownership were Jiang Zhicheng, grandson of former CCP leader Jiang Zemin, through a private equity vehicle that owned shares through a Shanghai subsidiary that held shares in a Beijing investment center that held the actual Ant stake. Three layers of intermediary between the princeling and the asset.
This is not a bug in China’s system. It’s the feature. The opacity is deliberate. Political families can hold economic positions without the visibility that would invite domestic criticism or foreign scrutiny. When Xi’s anti-corruption campaign targeted those ownership structures, it was doing so selectively — not to expose the system but to clear specific positions for reassignment.
Even Xi’s own family, the anti-corruption campaigner himself, has substantial wealth held offshore through corporate structures that were documented in the Panama Papers and subsequent reporting. The corruption crackdown is a factional weapon, not a structural reform.
The Jack Ma Moment, Fully Understood
The Ant Group suppression is worth examining more carefully than the standard “China cracked down on tech” narrative suggests.
Ma’s October 2020 speech was not merely impolitic. It was read by Xi’s government as threatening on multiple dimensions simultaneously. Ant’s financial products had accumulated over 1.3 billion users of Alipay. Its money-market and lending operations had grown to a scale that the CCP central bank viewed as undermining its control over monetary policy — Ant was, in effect, running a parallel financial system at a scale the state couldn’t monitor or control. The capital accumulated in Ant’s system could theoretically be mobilized for political purposes by whoever controlled the company — and the investors behind Ant included people with ties to Xi’s rival factions.
The suppression served multiple goals at once: it eliminated a financial structure that had grown outside party control, it neutralized a set of rival-faction investors, it disciplined the private sector broadly by demonstrating that no company was too large to be brought to heel, and it transferred competitive advantage back to the state banks Ma had criticized.
Ant’s loss was state banking’s gain. The winners were identified before the intervention was announced.
This is the Jack Ma moment as the model predicts it: not an anti-monopoly action, not a data privacy concern, not even primarily a speech offense. It was an asset reconfiguration. The question was who controlled a $300 billion financial infrastructure, and the answer that emerged was: not a private entrepreneur with rival-faction investors.
Civil-Military Fusion and the PLA’s Economic Role
The People’s Liberation Army runs businesses. This has been true since Deng Xiaoping’s era, when military units were encouraged to supplement their budgets through commercial ventures. The scale and integration is different from the IRGC — the PLA was formally ordered to divest its commercial holdings in the late 1990s, and surface-level compliance was largely achieved.
But Xi’s “civil-military fusion” strategy has created a new form of the same integration. Rather than the PLA directly running companies, civil-military fusion requires private companies — especially in technology, telecommunications, and advanced manufacturing — to integrate defense requirements into their development. The 2017 National Intelligence Law obligates all Chinese citizens and organizations to cooperate with national intelligence work. Huawei, DJI, CATL: every major Chinese technology company operates under the legal obligation to cooperate with state security requirements that are defined by the party.
This is a different architecture than IRGC control of Khatam al-Anbia. It’s not the enforcement arm owning the company. It’s the enforcement arm having a standing claim on everything the company produces, develops, or knows. The distinction matters for investment analysis: the risk isn’t asset expropriation in the traditional sense. It’s that every valuable technology or data asset in the Chinese private sector carries an embedded state claim that can be activated at any time.
The Investor Misread
Western institutional investors have made the same mistake in China that they make with the other cases in this series: they have analyzed the regime through the lens the regime provides. China presents itself as a developmental state pursuing common prosperity through guided capitalism with Chinese characteristics. Western analysis has debated whether China is “really” moving toward liberalization, whether Xi’s anti-market interventions are tactical or structural, whether the fundamentals of Chinese companies are attractive enough to override political risk.
The asset map question cuts through this debate. Ask not whether China’s economy is growing. Ask: on what terms do private actors hold their commanding-heights positions? The answer is: on conditional tenure, contingent on political loyalty, subject to recall by the party at any time, through mechanisms that don’t require formal expropriation — just regulatory suffocation or factional reassignment.
Under those conditions, investing in a Chinese commanding-heights company means investing in a position the party might want for itself or for a different faction. That’s not a standard business risk. It’s a structural feature of the system.
The tell — the observation that most clearly distinguishes the China model from a genuine mixed economy — is what happened to the Ant Group investors who were affiliated with rival political factions. Their investments didn’t just lose value when Ant was suppressed. They were targeted. The suppression of the company was, in part, a suppression of their financial positions. Political and economic risk are not separate categories in China. They are the same category.
China is a party-corporate conglomerate — as one close observer termed it — in which CCP membership functions as the toll on significant economic activity, senior party relationships provide discounted access to the commanding heights, and private wealth is held on conditional tenure subject to factional and political risk. The ideology is Marxist-Leninist with Chinese characteristics, updated as needed. The asset map is a network of party-aligned relationships with selective anti-corruption enforcement as the mechanism for factional redistribution.
The falsifiable call: Xi’s anti-corruption campaign will not demonstrably reduce the Politburo-connected discount on land and capital access. The discount will persist or modestly decline, as the 2018 study showed. If a follow-up study demonstrates that the discount has been eliminated — meaning firms connected to Politburo members pay market prices for government-controlled resources — the structural capture is breaking down.
What Would Change My Mind
If Xi’s anti-corruption campaign produces a generation of leadership with no princeling connections and no commanding-heights equity positions — and if corporate governance in Chinese state-adjacent companies becomes genuinely independent of party direction — the toll-booth model is wrong about China’s structure.
If the civil-military fusion requirements are publicly reversed and Chinese companies are genuinely permitted to operate without national security obligations to the state, the embedded state claim on private sector assets has been removed.
If a private Chinese technology company reaches global commanding-heights scale — comparable to Ant Group at its peak — and is permitted to operate, list, and grow without factional expropriation, the conditional tenure doctrine has been limited in ways that matter.
The Chinese economy is large enough, and the CCP’s record long enough, that contradicting evidence could appear. I’m watching for it.
Part of the “They Kept the Flag” series. Anchor: They Kept the Flag, They Took the Assets. Also: Iran: The Asset Map · Russia: The Limiting Case · Venezuela: The Cartel State.
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