China is planning to “adjust” excessively high incomes among the country’s wealthiest to “give back to society” in a bid to meet its new development goal by tackling inequality.
The move would be the next step to achieve “common prosperity” after becoming a “moderately prosperous society” — a goal envisioned by late leader Deng Xiaoping — according to state-run Xinhua News Agency. The plan was floated during a meeting Tuesday, also attended by Chinese President Xi Jinping, to discuss the country’s new economic and societal goals.
“In order to adapt to societal changes and meet people’s ever-growing demand for a better life, we must focus on promoting the common prosperity of all people,” Xinhua reported, citing a summary from the meeting.
Despite its hoisted importance, experts note that previous party speeches and documents have also touched upon the goal of common prosperity. Xi also mentioned the phrase during the 19th National Congress of the Chinese Communist Party in 2017.
China is home to some of the world’s wealthiest people, and the number of high-net-worth-individuals has seen an annual compound growth rate of 15% from 2018 to 2020, according to a recent joint report by China Merchants Bank and market research firm Bain & Company. By the end of 2021, the number of mega-rich individuals in China is expected to reach nearly 3 million.
The country currently imposes a 45% tax rate on individuals with an annual income of 960,000 yuan ($147,700) or higher. It’s unclear how Tuesday’s declaration would affect them.
After Tuesday’s high-profile meeting, tech titan Tencent sprang into action the following day, setting up a 50 billion yuan fund earmarked for “improving income for low-income groups, as well as boosting basic health care system and education.” Just four months ago, the company donated the same amount toward its social welfare campaign, focusing on long-term goals such as carbon neutrality and education innovation.
In recent months, several large companies have found themselves in the authority’s crosshairs as they tighten their grip on various sectors, including fintech, ride-hailing, gaming, and online education.
Ma Rui, a China tech analyst based in San Francisco, said she expects more companies to jump on the donation bandwagon in the near future.
“I think lots of companies whose public reputations have taken a negative hit as of late, such as Didi and Meituan, will follow suit in one way or another,” she said. “And I wouldn’t be surprised if more companies would follow.”
Editor: Bibek Bhandari.
(Header image: People Visual)