China's remarkable business expansion abroad since the mid-1980s cannot be explained simply by applying existing theories, which focus on conventional international businesses from capitalist systems. Many puzzling phenomena in Chinese investments abroad become intelligible only when we introduce a key variable–illicit privatization through internationalization. So far only advantageously-placed nomenklatura members and their kin have had access to crossborder ownership, but many of them are accumulating sizeable private wealth at the cost of nationalized property. Contrary to an impression held by many in the West, the Chinese economy under Communist rule experiences spontaneous privatization parallel to what has happened in European postcommunist nations–though with a few Chinese characteristics. An examination of informal privatization in China's multinationals adds a new dimension to our understanding of the shift from state socialism to market capitalism.