The expression comes from an old Chinese folk saying, and entered the English language when used by Mao Zedong. The full quote goes as follows:
All reactionaries are paper tigers. In appearance, the reactionaries are terrifying, but in reality they are not so powerful. From a long-term point of view, it is not the reactionaries but the people who are really powerful.

"Talk with the American Correspondent Anna Louise Strong" (August 1946), Selected Works, Vol. IV, p. 100.

I think that paper tigers would be one of the folk art paper cuts that you can still find here - people produced beautiful, complex designs often of good luck symbols or protective gods. So a paper tiger would scare away supernatural baddies, but shouldn't concern a hardcore dialectical materialist class warrior who's abandoned feudal superstition on the path to proletarian glory.