Chinese President Xi Jinping is embarking on his biggest push to recover corporate tax revenue in a shift after a decade of supporting businesses through tax cuts. Now many companies are being hit with clawback bills that far exceed their first-half earnings, Bloomberg reports in an article titled "Xi’s unprecedented tax clawback hammers Chinese listed firms," published August 25, 2026. Moreover, the crackdown signals a break from a decades-old growth model built on provinces using generous tax subsidies to hit economic targets, forcing local provinces to rely more on the national government to meet their day-to-day spending needs. 

In the absence of tax subsidies to spur growth, local governments are “in a difficult bind” as they search for new revenue sources, explains Stanford political scientist Jean Oi, the director of the China Program at APARC. While Beijing understands fiscal reforms are needed to boost local governments' revenue-earning potential, little progress has been made, she notes.

“Both the central and local governments have an interest in getting more taxes,” says Oi. “They’re trying to get everybody to pay up and follow the rules, but is it enough? I really worry," she tells Bloomberg.