After decades of complying with Deng Xiaoping’s maxim that it’s okay for some people to get rich first, Beijing suddenly seems more inclined to eat its rich – or at least take a healthy bite of their wealth.

Following the high-profile crackdown on tech companies like Alibaba and Meituan, an Aug. 17 speech by President Xi Jinping on “common prosperity” caught the attention of investors. Xi called for rationally “adjusting” excess income and for higher income individuals and businesses to contribute more to society. He also called for more aggressive measures to expand the middle class and the social safety net, including health and care for the elderly.

China has long been one of the world’s most unequal large economies, with a common measure of income inequality, the Gini coefficient, at 0.465 in 2019 according to official data on a possible 1.0. Wealth inequality is higher: the richest 1% hold 30.6% of the country’s wealth according to Credit Suisse data, below the United States at 35.3% but well above the Kingdom United, Japan and Italy.

But rapidly falling birth rates, the coronavirus pandemic and its aftermath have made inequalities harder to ignore. The political stumbles and anti-competitive practices of tech titans like Alibaba and Tencent have also made Xi a convenient target for public anger. As a result, high net worth individuals and Internet technology companies may be under additional pressure to “donate” resources to social causes and have their tax rates rise. The long-talked about property tax in China may finally become a reality, although this is less certain.

Beijing’s response to the pandemic has focused on business lending forbearance and credit growth rather than direct support to households like in the West. This has helped small businesses survive and has positioned China well for a rebound in exports. But it also meant a significant loss of income for average households and even more debt as house prices soared again. The increase in Chinese household debt over the past five years has been one of the most impressive in recent global history: one of the reasons consumption has remained stubbornly low this year, even as the revenue growth finally rebounded.

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