A 1994 reform shifted tax revenues to China's central government while leaving spending obligations at the local level. This created a structural deficit for municipalities, forcing them to rely on off-balance-sheet land lease auctions as their primary source of funding, which in turn fueled the property bubble.

For D1 Capital, the primary risk in China isn't economic but political. The government's ability to arbitrarily influence resource allocation, punish successful companies, and eliminate entire sectors without due process creates an unacceptable level of uncertainty for capital allocators, regardless of how cheap valuations become.

The "Liu Zhi" system is a form of extrajudicial detention used by China's anti-corruption agency. It allows officials to hold individuals, including business executives, for months without access to lawyers or the normal court system in harsh conditions. This creates a climate of intense fear and uncertainty for the business community.

A massive foreign investment package is not just an economic transaction; it's a strategic tool. By embedding itself in a nation's economy through land and real estate, a foreign power buys political leverage and can subtly shape policy to its own advantage, corrupting the country from within.

The Dutch government took control of Chinese-owned Nexperia, a major European chipmaker, citing national security risks. This move is far more aggressive than U.S. strategies like taking minority stakes, indicating a European willingness to nationalize key tech assets to counter foreign influence in the semiconductor supply chain.

When the investigation reached the President's inner circle, the government machine mobilized against the anti-corruption bodies. Ukraine's security services arrested several detectives involved in the probe, accusing them of collaborating with Russia. This tactic attempts to reframe a legitimate investigation as a threat to national security.

In response to deflation and eroding profits from hyper-competition, the Chinese government's "anti-evolution" policy is a deliberate strategy to force consolidation, reduce overcapacity, and restore pricing power, thereby boosting corporate return on equity.

Beyond headline-grabbing scandals, the most insidious impact of a kleptocratic administration is its refusal to enforce existing laws, from financial regulations to anti-corruption acts. This quiet dismantling of the legal framework fosters a culture of impunity where bad actors thrive, ultimately harming ordinary people and destabilizing the entire system.

China loaned Venezuela over $60 billion but halted funding due to extreme corruption. Instead of making new strategic investments, China now focuses on asset recovery, accepting oil shipments simply to pay down the massive outstanding debt. This highlights the limits of 'debt trap diplomacy' in utterly dysfunctional states.