The Communist Party allowed some Chinese people to get rich first in the country’s impoverished years. Now, it thinks these people have gotten too rich.
President Xi Jinping of China has ordered authorities to step up redistributing the country’s wealth and adjusting “excessively-high income,” moves that could hit China’s richest entrepreneurs.
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A leadership meeting chaired by Xi concluded on Tuesday that high-earning people and businesses should be made to “give back to the society,” with the aim of making sure all citizens live prosperous lives together.
The directive is a fresh signal of a turning tide for the country’s business tycoons, who have in the past decades enjoyed state support in amassing enormous wealth and influence as China aimed at unbridled economic growth.
Now, as the Communist Party shifts its focus away from hitting growth targets, the high-flying entrepreneurs and their business empires will be placed under more pressure to demonstrate that their wealth can be used for the leadership’s new priorities, such as social equity and national security.
“If you look over the past two decades, higher economic growth has been the party’s main objective. But now, that has changed,” said Sun Xin, an expert on Chinese political economy at King’s College London.
“The private entrepreneurs will also face political pressure to demonstrate their loyalty to the party because their legitimacy is no longer solely built upon their ability to bring about economic development and employment,” Sun said.
Following Chairman Mao Zedong’s death, his successor, the paramount leader Deng Xiaoping, endorsed market reforms, arguing that a part of the population should be allowed to get rich before others. The economic reforms that started in the 1980s drastically improved average living standards in China, but also widened the gap between rich and poor.
The leadership under Xi is tightening its grip on business elites to rein in their influence and also appeal to poor workers and bureaucrats – the masses whose support remains essential to the party’s rule.
China has more than 1,000 billionaires, compared with about 700 in the United States, according to wealth tracking company Hurun Report. Dozens of them are members of China’s top legislative and political advisory bodies, and the Chinese capital Beijing has been the world’s billionaire capital for the past six years, according to the research group.
It’s unclear exactly how the wealth redistribution push will be carried out. But the tech giants, which have come under intense regulatory scrutiny due to their growing influence in Chinese society, are expected to take a further hit.
A series of regulatory crackdowns targeting antitrust practices, financial risks, data insecurity, and gaming addiction have caused a Chinese tech stock sell-off and wiped out billions of dollars in the personal wealth of tech tycoons like Alibaba founder Jack Ma and Tencent founder Pony Ma.
Seeking to placate the party leadership, the businesses are adopting a low profile and pledging unconditional obedience to the authorities.
On Wednesday, Tencent pledged to invest 50 billion yuan ($7.7 billion) to support Beijing’s “common prosperity” call, in addition to the $7.7 billion social investment it made earlier this year. The money would be spent on the government’s key policy areas, such as rural development, education equality and improving healthcare for ordinary people, the social media and gaming giant said in an online statement.
The founders of smartphone maker Xiaomi, food delivery giant Meituan, and TikTok owner ByteDance have also in recent months pledged donations together worth billions of dollars.
Sun, the political economy expert, said that with China’s economic growth slowing down, the leadership under Xi has identified social equity as a key area where the party can demonstrate its achievement in the years to come. At the same time, promoting equality also provides the party a justification to exert stronger interventions in the market economy, Sun added.
The increasing control over private businesses have gained some support among young workers, who have complained about incessant competition in education and in the job market. Internet users have sometimes adopted Marxist language and condemned entrepreneurs like Jack Ma as exploitative capitalists.
But analysts have warned that state interventions could make China too hostile for private businesses to make innovations and attract investments. Dickie Wong, head of research at Hong Kong brokerage Kingston Securities, said many foreign investors were staying away from Chinese stocks, fearing more regulatory crackdowns.
On Thursday, Alibaba’s stock price hit an all-time low in Hong Kong, after China’s market regulator published new draft guidelines tackling anti-competitive behaviors this week. A symbol of China’s tech boom, the company has seen its shares plunge by 30 percent since the beginning of 2021.
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