Over the past year, the flourishing tech sector of China has been marred by terms like the disorderly expansion of capital (资本无序扩张), savage growth (野蛮生长), double reduction (双减), and spiritual opium (精神鸦片). “Common prosperity” (共同富裕), the new buzzword of the Communist Party of China (CPC), has thrown the tech sector and broadly the private sector in a state of limbo following a regulatory crackdown. With no specific details declared yet, China’s super rich have been left to interpret the implications of common prosperity for themselves.
Some of them have stepped up their philanthropic work to placate Beijing. Last week, Alibaba Group announced that it will invest US $15.5 billion by 2025 in support of “common prosperity”, which will be used to foster science and technology innovation, support small and medium-sized enterprises, shore up agriculture industrialisation in underdeveloped rural areas, increase youth employment, provide security for gig workers, care for vulnerable groups, and develop better social welfare for low-income workers.
Similarly, last month, in a statement after releasing its Q2 earnings, Tencent said that it would double its funding for its corporate social responsibility initiatives to US $15.4 billion and launch a “Common Prosperity Special Programme”, which will be used to support people with low incomes, improve basic medical insurance coverage, and make investments for developing rural areas and education at the grassroots level of society.
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In its Q2 earnings report, Pinduoduo also unveiled an agriculture initiative worth US $1.55 billion to support rural farmers by improving food security, food safety, and agri-food technologies. Its founder Colin Huang donated 2.37 per cent of his shares worth US $1.85 billion before stepping down as the CEO in March. The Founder of ByteDance, Zhang Yiming, announced to donate 500 million yuan (US $77.35 million) to the city of Longyan for education. The CEO of Meituan, Wang Xing, who donated 10 per cent of his stake in Meituan worth about US $2.27 billion to his philanthropic foundation, told investors that “common prosperity” was “built into the genes” of his company.
By the end of August, at least 73 Chinese companies had included the policy buzz phrase in their letters to shareholders about their Q2 earnings, according to Bloomberg.
The rush to pledge support for the Common Prosperity initiative gained momentum after Chinese President Xi Jinping, in his speech to the CPC’s Central Committee for Financial and Economic Affairs on August 17, declared that “Common prosperity is an essential requirement of socialism and a key feature of Chinese-style modernisation”. It seeks to use taxation and other income redistribution mechanisms to expand the middle class, boost incomes of the poor, rationally adjust excessive income and ban illegal income. This flagship term invokes a certain fear because of the failed attempt to pursue an egalitarian society at its time of origin under the regime of Mao Zedong. However, Han Wenxiu, Deputy Director of the Central Finance and Economic Affairs Commission Office, while dispelling doubts about tertiary distribution said that the government would not “rob the rich to help the poor”.
Beijing’s spate of actions has made policymakers, investors, journalists, and China watchers curious about CPC’s motivations. China’s current strongman is moving beyond Deng Xiaoping’s famous dictum—“Let some people get rich first.” Xi will, in all probability, become the president once again and hence wants to consolidate social legitimacy. State media agency Xinhua reported that the approach to common prosperity would strengthen the foundation for the Party’s long-term governance, besides addressing economic issues. Some experts believe that Xi wants to quash billionaires and tech companies before they become an alternative form of social and political power.
The big tech entrepreneurs who are already facing crackdowns have become the prime targets in CPC’s drive to rein in the highly affluent class. It remains to be seen whether existing measures would close income disparities or undermine long-term economic development by killing entrepreneurship.
This article was first published on ORF.
The author is Research Intern with the Centre for Security, Strategy and Technology, ORF. The views expressed in this article are those of the author and do not represent the stand of this publication.
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