Is Getting Rich Still Glorious? Xi Targets Wealth Inequality

A recent high-level Party meeting in Beijing has called for the more equitable distribution of wealth in Chinese society, possibly portending significant changes to the country’s economic and social systems. According to most experts, the meeting—believed to be the first chaired by Xi since the conclusion of the Party’s secretive annual conclave at Beidaihe—is a signal that recent shakeups in the technology and education industries were simply precursors to reforms yet to come. At The Financial Times, Tom Mitchell and Sun Yu reported on how the meeting could put new pressure on corporations to donate their wealth:

State media reported that a meeting of the Chinese Communist party’s Central Financial and Economic Affairs Commission on Tuesday, chaired by Xi, had emphasised the need to “regulate excessively high incomes and encourage high-income groups and enterprises to return more to society”.

The committee added that while the party had allowed some people and regions to “get rich first” in the early decades of China’s reform and opening period, it was now prioritising “common prosperity for all”.

[…] The head of a large private charity said pressure on the private sector had led to “a big jump in corporate donations”.

“It is high time the authorities address the income gap,” the charity executive said. “But most donations go to government-backed charity groups with little oversight.” [Source]

At The Wall Street Journal, Keith Zhai and Stella Yifan Xie explained the importance of China’s hottest catchphrase, “common prosperity”:

Like many Communist Party slogans, details remain vague. But officials and analysts who have tracked the phrase’s use say it is meant to convey the idea that leaders are returning to the party’s original ambitions to empower workers and the disadvantaged, and will limit gains of the capitalist class when necessary to address social inequities.

[…] “Compared with just five years ago, China’s leadership is paying a lot more attention to social equality,” said Larry Hu, chief China economist at Macquarie Group. In addition to cracking down on tech companies like Ant, which regulators accused of luring young people into debt traps, he said Beijing’s priorities now include diverting more financial support to poorer regions and taming property prices.

[…] “Xi is hoping to calm the public as the economy slows down and intends to appear concerned about popular livelihoods,” said Dorothy Solinger, a professor emerita of political science at the University of California, Irvine. [Source]

At The South China Morning Post, Orange Wang and Su-Lin Tan reported on potential policy changes to accompany the central government’s new focus:

During the meeting, plans such as favourable changes in taxes and social security payments for middle income earners, more policies which increase earnings for those in low-income groups and crackdowns on practices and loopholes that may give rise to “illicit income” were given as examples of how the plan could succeed.

[…] But common prosperity doesn’t just apply to financial markets – it also applies to society’s spiritual and cultural lives. It needs to be extended to rural and urban areas – and in particular, rural infrastructure and rural living conditions need to be improved, Xi said.

[…] Xiong Yuan, chief macro analyst at Guosheng Securities, said the government could move to cut individual income taxes, step up the “rich taxes” including property, inheritance and capital gains taxes, or introduce more preferential policies for charitable trusts and public welfare donations. [Source]

In certain respects, the policy is in keeping with Xi Jinping’s long term goals. In 2020, China declared “complete victory” over rural poverty, concluding a campaign Xi piloted. Yet the country’s significant remaining pockets of poverty are a challenge for politicians and propagandists alike. Premier Li Keqiang’s embrace of the “street vendor economy” as a boon to the 600 million Chinese people still living on a monthly salary of $140 was eventually censored after backlash.

China’s new course comes on the heels of tough measures regulators have taken to bring powerful tech corporations to heel. The central government also overhauled China’s entire extracurricular education industry practically overnight. Why is Xi pushing such muscular policy measures in 2021? Bloomberg News surveyed expert opinion to find the answer:

Leading China watchers canvassed by Bloomberg point to a range of factors driving the crackdown. But two in particular stand out in explaining why this is happening now rather than five or 10 years ago: The push for self-reliance as ideological divisions with the U.S. become more entrenched, and Xi’s own consolidation of power ahead of a once-in-five-year leadership reshuffle in 2022 at which he’s set to extend his indefinite rule over the country.

[…] “Being seen to crack down on corruption and vested interests has been a powerful tool for Xi Jinping to define his term in office and to make the case for his continued rule,” said Rana Mitter, professor of Chinese politics at the University of Oxford. “The party is calculating that overall, the crackdown on larger companies will lead to more startups having space to breathe, and overall a boost to the economy.”

[…] “The crackdown is just the beginning — it’s the prelude,” said Feng Chucheng, a partner at research firm Plenum in Beijing. The party “wants to first halt the source that is creating inequality.” [Source]


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