Chinese president vows to ‘adjust excessive incomes’ of super rich
Chinese Communist party to crack down on almost weekly creation of billionaire company bosses
Last modified on Wed 18 Aug 2021 13.15 EDT
China’s president has vowed to “adjust excessive incomes” in a warning to the country’s super-rich that the state plans to redistribute wealth to tackle widening inequality.
According to reports in state media, Xi Jinping told officials at a meeting of the Chinese Communist party’s central financial and economic affairs commission on Tuesday, that the government should “regulate excessively high incomes and encourage high-income groups and enterprises to return more to society”.
The commission said it would pursue its “common prosperity agenda”, which has become the main focus of China’s policymaking after reports of discontent within the party’s central committee over the rise of a new class of wealthy entrepreneurs.
The policy goal comes amid a sweeping push by Beijing to rein in the country’s largest private firms in industries, ranging from technology to education.
Analysts said it was notable that the gaming and social media firm Tencent, one of China’s biggest tech groups, said it would expand its social commitments as it reported a jump in second-quarter profit.
The Tencent chief executive, Pony Ma said the company was in business to help wider society by “deploying our technologies and expertise to help small and medium-sized businesses, public services and corporations collaborate internally and connect with their users externally”.
Earlier this month, the company’s games were branded “spiritual opium” in state media, prompting it to tighten controls on children accessing them. Yet despite fears of the impact of a regulatory crackdown, Tencent bucked expectations with net profits rising 29% for the three months to June to $6.6bn (£4.8bn) after a 20% increase in revenues.
Since last November, when regulators prevented the tech company Ant, 33% owned by its sister company Alibaba, from floating on the Shanghai and Hong Kong exchanges – a move that would have cemented the position of its boardroom chair, Jack Ma, as one of the world’s richest men – the Chinese Communist party has sought to crack down on the almost weekly creation of billionaire company bosses.
Stocks on the Shanghai exchange have fallen since a peak in February after a string of similar regulatory clampdowns on the financial sector and penalties on industries forced to comply with tighter environmental rules.
As a result, the country’s richest tycoons have already seen their wealth shrink. The combined net worth of the two dozen Chinese billionaires in tech and biotechnology whose holdings are tracked by Bloomberg dropped 16% since the end of June, according to analysis by the Financial Times.
Zhong Shanshan, the head of the bottled water company Nongfu Spring, last year overtook Jack Ma and Pony Ma as the richest person in China. He has a fortune of more than $72bn, about $24bn more than Jack Ma.
Xi, under pressure to answer critics who say he is soft on excessive pay and ostentatious displays of wealth, is expected to expand wealth taxes and raise income tax rates to achieve an “olive-shaped” income distribution that reduces the number of low-income and high-income groups.
Some reforms could be far reaching, including higher taxes on capital gains, inheritance and property. Higher public sector wages are also expected to be part of the package to limit rampant bribe-taking and corruption involving public officials.
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