China faces compounding risks from political succession uncertainty, a structural economic slowdown, and weakening fiscal capacity, according to a new report by Tomorrow's Affairs, a London-based publication. The analysis, released on 26 October 2026, argues that the country's growth model and social contract are under simultaneous pressure from multiple directions.

Succession Risk Under Xi Jinping

Xi Jinping's sweeping consolidation of control over state, party, provincial, and military leadership has eliminated potential rivals — but critics argue this has created dangerous fault lines for the future. The report contends that former officials who were humiliated during Xi's purges could 'create havoc when the time comes for Xi's succession.'

The publication draws on Chinese history to support this thesis, noting that 'periods of apparent stability followed by turmoil have recurred throughout Chinese history.' The absence of a credible successor or a transparent transition mechanism is, according to the report, a structural vulnerability rather than a sign of strength.

Economic Headwinds: Ageing, Property, and Trade

The economic picture painted by the report is equally sobering. China's growth model faces three simultaneous drags: a rapidly ageing population, a prolonged property market downturn, and rising external trade barriers. Both the United States and Europe have responded to Chinese export volumes with policy measures that are increasingly constraining market access.

Notably, this constellation of pressures arrives at a moment when Beijing's capacity to stimulate its way out of trouble appears structurally diminished.

Fiscal Collapse: A Historic Parallel

Perhaps the most striking finding in the report concerns China's fiscal trajectory. Taxes excluding social insurance contributions collapsed by nearly six percentage points between 2012 and 2025, falling from 18.4% of GDP to 12.6%, according to the publication.

The report draws a pointed historical comparison: 'China has never managed to raise sufficient sums of money via personal income taxation, even during a period of extraordinary economic vibrancy,' it stated. A similar fiscal deterioration, it argued, was observed in the Ming and Qing dynasties before their eventual collapse — a comparison the report uses deliberately to underscore long-run systemic risk.

The publication further warned of an 'unhealthy reliance on non-tax revenues,' which leaves the government with few options when those revenue streams dry up. This, it argues, could constrain Beijing's ability to exercise power domestically and project it abroad.

The Social Contract Under Pressure

'China's entire growth and fiscal model, along with the social contract between the state and its citizens — coveted stability and material prosperity for restricted freedom and muzzled voice — may be in trouble,' the report stated directly.

This framing is significant: the implicit bargain that has underwritten Communist Party legitimacy for four decades — rapid economic growth in exchange for political acquiescence — may no longer hold if material conditions deteriorate. Critics of the analysis, however, may argue that the Chinese state retains considerable coercive and administrative capacity to manage dissent even in a downturn.

What to Watch

The report's findings come as Beijing grapples with deflation pressures, a cautious consumer, and a real estate sector that has yet to find a stable floor. How China's leadership responds to the converging fiscal and demographic constraints — particularly ahead of any eventual political transition — will be a defining question for the global economy in the years ahead.