Cai Qi’s Shocking Secret Report to Xi – Even Top CCP Leaders Don’t Believe China’s Official Numbers

Hello everyone, it's been a while since our last show. Today we are talking about two important topics. First, Cai Qi, the man who is effectively the CCP's number two, no longer trusts China's National Bureau of Statistics. He set up his own independent investigation team to find out the real economic situation and submitted a secret report to Xi Jinping. We will discuss what the secret report actually says. Second, the severe physical crisis the CCP is facing right now and the three major impacts it is having on the regime. Recently, Du Wen, former director of the Legal Advisory Office of the Inner Mongolia Government, revealed on his YouTube program that Cai Qi, director of the General Office of the CCP Central Committee, submitted a secret report on China's economy to Xi Jinping. The report shows that local governments across China are bleeding money. Their ability to generate revenue has completely dried up. Enterprises are facing the most severe cost pressures in recorded history. Although the government has loosened monetary policy, social confidence has collapsed. This points to a systematic crisis in the Chinese economy. The report also notes that Xi Jinping is most worried about foreign capital leaving China. Du Wen said Cai Qi did not use data from the National Bureau of Statistics. Instead, he built his own investigation team to collect information. This shows that even inside the CCP, the National Bureau of Statistics data is no longer considered reliable. This is very important. Many international institutions and scholars are still using China's official statistics for analysis. But the people at the very top, Cai Qi and Xi Jinping, no longer believe these fake numbers. The internal report states that by the end of April 2026, China's producer price index, PPI, has fallen to 42 consecutive months. The manufacturing purchasing manager's index, PMI, has stayed below 50%, the contraction zone, for 13 straight months. Out of 41 key industries, 31 are seeing price drops. Production costs for industrial enterprises above a certain scale have reached their highest level since 2018. Profit margins have hit the lowest level in history at only 4.8%. Total profits fell 2.1%. Du Wen pointed out that the Chinese companies are not just suffering from low profits. Their entire business logic is being destroyed. They face five heavy pressures, weak demand, serious payment connection problems, vicious price competition, policy uncertainty, and declining sense of safety among entrepreneurs. Many companies show revenue on paper, but they cannot actually collect the money because of the severe triangular date. In other words, a company is waiting to be paid by its customers, while at the same time, it cannot pay its own suppliers. As this problem spreads through the supply chain, debts pile up and cash stops flowing. Local governments delay payments, state-owned enterprises hold back money, and big companies squeeze small ones. This has left many private firms losing money the more they operate. Du Wen reveals a striking figure. 37% of people currently under the so-called Liuzhi detention investigation by the CCP's discipline inspection system are entrepreneurs. Many have been detained two or three times. Liuzhi detention was originally meant for public officials suspected of corruption and misconduct. It restricts personal freedom for investigation. Now it is being used against private entrepreneurs. This shows that facing fiscal difficulties, the CCP wants to extract money from private business owners. On the monetary side, China is not short of money, but the money cannot enter the real economy. By April 2026, China's broad money supply M2 exceeded 353 trillion yuan, or $52 trillion, twice that of the United States. Yet loan demand continues to worsen, and new loans even turned negative at one point. Du Wen said people don't want to borrow. Companies dare not expand. Banks dare not lend to private firms. Local governments can only keep borrowing to survive. These signs show that while money is loose, social confidence has collapsed. Cai Qi's report says most local governments are in serious difficulty. The three guarantees—basic livelihood, salaries and operations, plus debt repayment, temporary staff wages and infrastructure—payments keep rising. Revenue cannot cover spending. Even in relatively wealthy provinces, rigid expenditures now take up over 90% of available funds. Official figures, which the CCP itself does not fully trust, can no longer hide the deficits. In the first quarter of this year, 82 out of 31 provinces ran deficits. Even Shanghai was the strongest, is now struggling. The bottom three provinces, Tibet, Gansu and Guangxi had revenue equal to only 14%, 22% and 30% of their spending. In the past, deficit provinces received transfer payments from richer ones. Now almost all provinces are in deficit. How will local governments continue to function? The biggest risk, according to the report, is severe cash flow shortages in local government public welfare projects. A wave of defaults could come at any time. Migrant workers from contracting companies are starting collective protests. This creates political and public security risks. Payment delays are getting longer, driving many companies to collapse or bankruptcy. Many multi-international companies have not closed their China factories yet, but they are cutting new investment, moving new production to India, Vietnam and Mexico, and gradually shifting regional headquarters, top talent and profit overseas. Du Wen said foreign capital withdrawal is one of Xi Jinping's biggest worries. The CCP's response has been to roll out many measures to stop capital from leaving. Du Wen summarizes four obvious features. Official data still shows economic growth, but ordinary people feel the situation is getting worse. Banks appear stable on the surface, but real businesses suffer severe cash shortages. Cities have not suddenly collapsed, but commercial streets remain empty for long periods. Foreign capital has not lived in one big wave, but new investment in China keeps decreasing. The real problem, Du Wen says, is that the CCP's system of high centralization, lack of rule of law and weak property rights protection can no longer support a modern market economy. Market economies need property safety, policy stability, judicial independence and information transparency. Today's China is regressing in all these areas. Facing pressure, the CCP is striking hard. In May, eight departments, including the China Securities Regulatory Commission, issued a plan to crack down on cross-border security activities. They investigated three cross-border brokers and imposed heavy fines. For the next two years, Chinese investors can only sell overseas stocks, not buy new ones. After two years, these brokers will have their domestic services shut down completely. On June 1, new rules on overseas investment further tightened restrictions on foreign transactions, technology transfer, and even travel by personnel with technical knowledge. Why is the CCP so desperate to stop people from investing overseas? Bloomberg estimated that $1.04 trillion in capital fled China last year to bypass controls, the highest since records began in 2006. This has panicked the CCP. The real number may be even higher. The CCP's fiscal crisis is bringing three major blows to the regime. First impact, decline in basic governance. Local governments handle daily operations, civil servant salaries, teacher and doctor pay, police and stability maintenance, social security, healthcare, infrastructure, public transport, and community services. When money is tight, governance slowly weakens rather than collapsing suddenly. We have seen salary cuts for officials, unpaid teachers and doctors, suspended bus routes, reduced medical coverage, defaulting investment companies, increased fines on businesses, and long-distance phishing law enforcement, where police from one province arrest entrepreneurs in another to collect revenue. Second impact, weakened stability maintenance. The CCP cares most about regime stability. Stability maintenance is a massive financial project, requiring huge spending on police, community workers, grid, monitors, digital surveillance, and big data systems. When the economy slows, tax revenue shrinks, and real estate collapses, stability costs rise instead of falling. This creates a dangerous cycle, worse economy, more discount, higher stability needs, greater fiscal pressure, sharper social contradictions. Most authoritarian regimes collapse not from sudden bankruptcy, but from gradual breakdown of grassroots control. The late Soviet Union is a classical example. Third impact, erosion of ruling legitimacy. Since the so-called reform and opening up, the CCP's legitimacy has increasingly relied on performance legitimacy, delivering economic growth and better lives. Now that growth is slowing, what can the CCP offer? The CCP will probably centralize power further, expand state-owned enterprise control, intensify extraction from private resources, use nationalism to divert pressure, and strengthen digital surveillance to cut costs. But these measures can only delay the problem. The old growth model based on real estate and debt has reached its end, and a new one has not emerged. Local fiscal crisis does not mean immediate collapse, but it means the economic foundation supporting CCP rule is steadily weakening. When fiscal exhaustion, loss of social confidence, local governance failure, and middle-class disengagement happen together, the system enters a state of slow bleeding, which may be more dangerous than a sudden crisis. Well, that's all for today. Please leave comments, share and like to help the algorithm spread our voice further, or go to my website at jenniferzengblog.com to sign up for a membership or make a donation. Thank you very much for your support. See you next time.