Everyone, today I'm talking about the business environment in China. In recent years, a disturbing trend has become increasingly apparent: China's entrepreneurs are "disappearing." The international media, such as The Wall Street Journal, has also taken notice, reporting on it with the headline, "The Sinister Disappearance of China's Bosses." The article points out that detentions, public shaming, and suicides are intensifying the country's corporate gloom.

This "disappearance" is not part of a normal legal process; often, it happens without the public's knowledge. They are taken away through a measure called "liuzhi," a form of extra-legal detention used by disciplinary commissions. For instance, in May 2022, Zeku CEO Liu Jun was taken away and placed under liuzhi by the Commission for Discipline Inspection without any public reason. Such incidents involve not only ordinary business people but also many well-known entrepreneurs and academics. In today's China, a person can be working normally one day and vanish the next, with their assets and company frozen or taken over.

"Liuzhi" carries a strong sense of arbitrariness and deterrence. It bypasses the formal judicial system, placing individuals directly into a "black box" isolated from the outside world. The personal freedom of the detained is completely stripped away. While theoretically this can last for a maximum of six months, in reality, it can be extended indefinitely. This practice has caused a significant psychological shock to the entire entrepreneurial class.

Since the end of the zero-COVID policy, China's economy has not recovered as expected. Instead, it has fallen into a deeper predicament, with social conflicts becoming increasingly sharp. This prolonged economic downturn has caused many entrepreneurs to lose confidence in the future. They are hesitant to invest or create new jobs, and the entire social fabric of trust is collapsing.

Official data shows that while total retail sales of social consumer goods have seen a slight numerical increase, after factoring out price effects, the actual growth is far from returning to pre-pandemic levels. The trend of consumption downgrading is evident, and industrial profits have also declined sharply, with many sectors even operating at a loss. This economic "winter" has already impacted the foundation of China's business model. However, what is more terrifying than the economic winter is the systemic strangulation, which I call the "red-gene curse."

The logic of this curse is as follows: when the market economy is developing smoothly, the government temporarily loosens its grip, allowing capital to grow freely. But when the economy encounters difficulties or the power of capital is perceived as a threat to its rule, the government will intervene without hesitation, "harvesting" private capital through judicial or extra-legal means. In the last two years, as local governments face fiscal strain, this harvesting has become more frequent and blatant. Many private entrepreneurs are "extorted" by local governments under various pretexts, a classic case of "fattening the pig for the slaughter."

Besides the extreme measure of "liuzhi," another tool that stifles business vitality is the "List of Dishonest Persons." In theory, this list is meant to punish debtors who fail to repay their debts and to uphold market credit. In practice, however, it has become a powerful tool for social control.

Once on this list, an individual is barred from taking flights or high-speed trains, cannot engage in high-level consumption, and their children may even be prevented from attending expensive private schools. In a society that heavily relies on personal relationships and reputation, this is tantamount to "social death." In recent years, with the economic downturn, a large number of entrepreneurs have been caught in debt disputes due to broken capital chains, leading to a sharp increase in the number of people on the list. Data shows that before the pandemic in 2019, there were about 5.7 million people on the list; just a few years later, this number has soared to over 8.3 million, a significant portion of whom are business owners listed due to contract disputes.

The fundamental problem with this system design is that it discourages risk-taking and innovation. In the United States, bankruptcy is a normal exit mechanism for businesses, allowing entrepreneurs to start over even after failure. But in China, a single failure can mean you never get a second chance. Even Wang Jianlin of Wanda Group, once China's richest man, was briefly placed on the list this year. In a system where not even Wang Jianlin is safe, who would dare to start a business and invest with confidence?

Under the "red-gene curse," entrepreneurs and migrant workers, though seemingly at opposite ends of the social spectrum, are heading towards the same fate. When the economy booms, entrepreneurs are the darlings of the era, and migrant workers can find jobs. But when systemic risks materialize, entrepreneurs are put under "liuzhi" or placed on the "dishonesty list," their companies collapse, and their wealth evaporates.

The migrant workers who lose their jobs revert from being city builders to being unemployed in the countryside. They return to their hometowns only to find no opportunities there either. In the end, whether it's the once-glamorous entrepreneur or the anonymous worker, both lose their future in a system that lacks the rule of law and security for private property.

In the United States, Elon Musk can openly criticize Donald Trump, and even as president, Trump cannot use the state apparatus to destroy Musk's company. This is because there is an independent judicial system and protection for private property rights. But in China, power overrides everything. Many people blame capitalists for social conflicts, failing to realize that in a system where power is unchecked, everyone, rich or poor, is equally vulnerable. This is the harshest reality that Chinese business people and ordinary citizens must face.