In Xi's China tycoons are vanishing, and Liuzhi may be the reason why

A growing number of China's top bosses are vanishing into Liuzhi, a secretive detention system where anti-corruption drives, blacklists, and bankruptcy laws converge to punish business failure

As much as the phrase “your boss is nowhere to be found today” can be music to employees’ ears on a Monday morning, in China, it is creating dread. Across the country, the unexplained disappearances of company heads have become a growing source of anxiety for both staff and investors. Many of these executives have been taken away not by rivals or debt collectors, but by China’s top anti-corruption agency and placed under liuzhi, a system of secretive detention that operates parallel to the country’s judicial system.

 

Originally intended for Communist Party officials accused of corruption and abuse of power, Liuzhi is increasingly being used as a tool of control over the private sector. According to a report by The Economist, from scientists and property developers to technology and finance executives, a widening circle of business leaders are being pulled into a system where detention, debt blacklists, and restrictive bankruptcy laws combine to make failure not just costly but perilous.

 

 

What is Liuzhi: The parallel detention system in China

 

Liuzhi (literally meaning “retention in custody”) is a system of secret detention in China used to discipline and investigate people accused of corruption, neglect of duty, or abuse of public power. It was formally created in 2018 under the National Supervision Law as part of President Xi Jinping’s sweeping anti-corruption campaign.

 

It allows China’s National Supervision Commission (NSC) to detain not only Communist Party members but also public officials, employees of state-owned enterprises, managers at institutions like hospitals or schools, and even private-sector individuals or foreigners involved in related cases. The system runs parallel to China’s judicial apparatus and does not require court approval to detain suspects.

 

In simpler terms, when someone is placed under liuzhi, they effectively disappear. Detainees are denied legal counsel, reportedly held in windowless rooms where lights stay on around the clock, and watched constantly. Recent changes introduced in June allow CCDI agents to hold people for up to eight months and “reset the clock” if new suspicions arise.

 

Scale of the crackdown on businesses in China

 

The numbers released by The Economist reflect a widening net. Total Liuzhi detentions, including both officials and businesspeople, climbed by nearly 50 per cent in 2024, reaching about 38,000 cases.

 

Those figures only hint at the real scale, since most affected companies are unlisted and not required to make public disclosures when their leaders disappear.

 

Some analysts say the expanding campaign has created a chain reaction. When an official comes under investigation, their entire business network — including suppliers, contractors, and financiers — often comes under scrutiny. This can pull private firms into the orbit of party investigations, regardless of their political role.

 

Why business leaders are at risk

 

Beyond corruption, China’s worsening economic environment has heightened tensions, The Economist noted. The country’s post-pandemic recovery remains weak, consumer spending is sluggish, industrial losses are widespread, and overcapacity and price wars are plaguing multiple sectors.

 

With local governments short on cash, there are growing reports of “deep-sea fishing” operations, where officials detain wealthy executives to seize their assets or extract confessions. Essentially, struggling businesses are being targeted to boost local coffers.

 

The result is a climate of fear that has pushed some of China’s business elite to breaking point. This year, at least five prominent executives died by suicide after being detained or investigated, including Wang Linpeng, once Hubei province’s richest man.

 

The ‘credit blacklist’: A second punishment

 

Parallel to Liuzhi, another mechanism has emerged to police business behaviour: the national credit blacklist. It began as a tool to penalise individuals who defaulted on small debts but now includes entrepreneurs whose companies fail.

 

Those named are banned from what the government calls “high consumption” activities — including flying, taking high-speed trains, staying in luxury hotels, or enrolling their children in expensive schools.

 

A court database cited by The Economist showed that about 200,000 people were added to the blacklist by the end of September this year, compared with just 17,400 in all of 2019. Nearly half of these new entries stemmed from business-related contractual disputes.

 

China’s underdeveloped bankruptcy laws are making matters worse. Courts often resort to blacklisting rather than orderly resolution. For struggling entrepreneurs, financial failure can quickly turn into social and legal paralysis — meaning an inability to travel, borrow, or rebuild.

 

When failure becomes a crime

 

In today’s China, the message is becoming increasingly stark: business failure is no longer just a financial risk, it can lead to personal ruin. Analysts quoted by the report described the trend as a “dangerous drag on business sentiment.”

 

The fear of detention or blacklisting discourages risk-taking at a time when Beijing is urging innovation and private-sector revival. President Xi Jinping met a group of top entrepreneurs earlier this year to signal a “reset” in relations, and a new law promoting private enterprise was announced in February.

 

But optimism has not returned. In late September, even Wang Jianlin, once China’s richest man, briefly appeared on the debtors’ blacklist — a sign that no one is immune.

 

For now, liuzhi remains one of the most secretive features of China’s governance. Officially framed as a tool for moral purification, it has become a symbol of unease among the country’s entrepreneurs. The signal from the current system is clear: if you fail, you don’t just lose your business — you may lose your basic ability to function.