China to curb ‘excessive income’ in push for ‘common prosperity’

August 18, 2021 10:08 pm | Updated 10:08 pm IST

In the wake of months of regulatory crackdown targeting alleged monopolistic behaviour of some of China’s biggest private sector companies, China’s Communist Party leadership has signalled that next in its sights are the country’s wealthy.

Party General Secretary and President Xi Jinping said measures will be introduced to curb “excessive incomes” and promote “common prosperity”, following a meeting on Tuesday of the Central Committee for Financial and Economic Affairs, which he heads.

Observers noted the timing of the meeting held particular significance, as the first notable public appearance of the leadership and the first major political announcement following the annual secretive retreat of top present and past leaders in the seaside town of Beidaihe near Beijing, which was believed to have taken place in early August.

Mr. Xi was quoted as saying by official media that “common prosperity is an essential require- ment of socialism”. Specific measures were not mentioned but an adjustment to the taxation structure is one possibility, analysts said.

A readout of the meet said “rather than being egalitarian or having only a few people prosperous, common prosperity refers to affluence shared by everyone, both in material and cultural terms, and shall be advanced step by step”.

Mr. Xi said “common prosperity” would be essential “to strengthen the foundation for the party’s long-term governance” ahead of “the second centenary goal”, referring to 2049 when the People’s Republic of China turns 100. Ending absolute poverty was the party’s goal for the “first centenary”, marked this year when the party turned 100. The meeting “called for establishing a scientific public policy system and a reasonable distribution system”. The readout said China’s “reform and opening period” saw the party “summarise both positive and negative historical experiences”, referring to the turmoil of the Mao years, realising that “poverty is not socialism” and “allowing some people and regions to get rich first”. Since the 18th Party Congress in 2012, the party “placed greater importance on gradually achieving common prosperity for all people”, the readout said. Mr. Xi came to power at the 2012 Congress.

It also called for implementing “the requirements of strict governance across the board” and to “enhance the supervisory capacity” of the financial system, suggesting the regulatory crackdown of the past year is set to continue.

Last week, a new government policy blueprint released by the party’s Central Committee and the State Council or Cabinet of the government called for “more legal and institutional efforts” to tighten what it called “unjust” micro-economic activities for the current five-year plan period (2021-2025).

Late last year, regulators launched investigations into alleged monopolistic practices of top tech companies, including Alibaba and Tencent, and took the unprecedented step of stopping at the last minute what was set to be a record-breaking IPO for Alipay, the financial payments arm of Alibaba. This year, crackdowns targeted ride-sharing app Didi Chuxing and the entire private education sector. The moves have wiped out close to $1 trillion in value for leading Chinese tech and education companies.

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