Xi Jinping, President of the People’s Republic of China. | Photo credit: AP
- While the country has made immense strides in reducing poverty, more than half of its population is said to still earn an annual income of 12,000 yuan ($ 1,858) or less.
- In recent months, China has taken sweeping steps to close the wealth gap
- It’s not yet clear whether the Chinese government has a specific time frame in mind to make these changes, but the launch of a pilot program in Zhejiang – one of China’s wealthiest provinces, home to Alibaba and Zhejiang Geely Holding Co – suggests change will be measured
Chinese e-commerce giant Alibaba has pledged to invest 100 billion yuan in President Xi Jinping’s vision of “common prosperity”, joining a growing legion of tech giants to embrace the Chinese leader’s goal of fulfilling the worrying wealth gap between its citizens.
Tencent Holdings previously announced plans to spend some $ 15 billion on social responsibility initiatives, with Pinduoduo also earmarking $ 1.5 billion in future profits to strengthen the country’s agricultural sector.
The latest development also comes on the heels of several Chinese billionaires – including 81 on Bloomberg’s 500 richest people list – loosening their purse strings in response to the Chinese government’s call for the country’s richest to repeat a year. their philanthropic contributions to society as a ‘moral obligation.’
What is “common prosperity”?
Marking the start of his second term as the country’s leader, President Xi Jinping in 2017 referred to the goal of “common prosperity” – a vision to transform China into a more equal society.
The idea is not entirely new and was first introduced by Mao Zedong in the 1950s. Under Deng Xiaoping’s leadership, China has increasingly liberalized, paving the way for a economic revolution based on growth and market reforms which has seen its economy transform into the second largest in the world.
But, while the country has made immense strides in reducing poverty, more than half of its population is said to still earn an annual income of 12,000 yuan ($ 1,858) or less. In the meantime, Chinese entrepreneurs have amassed huge fortunes and, according to a Bloomberg report, the country’s richest 20 percent now earn more than 10 times as much as the poorest 20 percent, reflecting a gap of wealth which is widening more than those observed in other developed economies, including the United States, Germany and France.
How does “common prosperity” take shape?
In recent months, China has taken sweeping steps to tackle the wealth divide, announcing a complete overhaul of the for-profit $ 100 billion education sector – including a ban on tutoring services from generate profits – new reforms to control health care and medical costs. and lobby ride-sharing and delivery companies to improve the wages and working conditions of their workers.
In a bid to transform the fabric of his society, he also intends to implement a strict ban on the number of hours minors can play computer / video games and warned against a culture of excessive alcohol consumption among businesses.
High incomes will also come under increased scrutiny as the government clamps down on tax evasion. There is also a growing effort to suppress a culture of “celebrity” and “star”, which the government has termed “western”.
In addition, there are also reports of a new residential property tax in the pipeline aimed at controlling house prices by eliminating speculation. Pilot programs in Shanghai and Chongqing have been underway since 2011.
It’s not yet clear whether the Chinese government has a specific time frame in mind to make these changes, but the launch of a pilot program in Zhejiang – one of China’s wealthiest provinces, home to Alibaba and Zhejiang Geely Holding Co – suggests that change will be measured, with an eye on preventing an economy that has thrived on the backs of a burgeoning private sector from derailing.