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Warning of income gap, Xi Jinping tells China’s tycoons to share wealth

BEIJING — Four decades ago, Deng Xiaoping declared that China would “let some people get rich first” in its race for growth. Now, Mr Xi Jinping has put China’s tycoons on notice that it is time for them to share more wealth with the rest of the country.

Commuters in Jinan, China on July 13, 2021. As the country’s leader prepares for a likely third term, he is promising “common prosperity” to lift farmers and working families into the middle class.

Commuters in Jinan, China on July 13, 2021. As the country’s leader prepares for a likely third term, he is promising “common prosperity” to lift farmers and working families into the middle class.

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BEIJING — Four decades ago, Deng Xiaoping declared that China would “let some people get rich first” in its race for growth. Now, Mr Xi Jinping has put China’s tycoons on notice that it is time for them to share more wealth with the rest of the country.

Mr Xi says the Communist Party will pursue “common prosperity,” pressing businesses and entrepreneurs to help narrow the stubborn wealth gap that could hold back the country’s rise and erode public confidence in the leadership. Supporters say China’s next phase of growth demands the shift.

“A powerful China should also be a fair and just China,” Dr Yao Yang, a professor of economics at Peking University who endorses the shift in priorities, said by email.

“China is one of the worst countries in terms of redistribution, despite being a socialist country. Public spending is overly concentrated in cities, elite schools and so on.”

Officials are pledging to make schooling, housing and health care less costly and more evenly available outside big cities, and to lift incomes for workers, helping more people secure a place in the middle class.

The “common prosperity” campaign has converged with a crackdown on the country’s tech giants to curb their dominance. Facing scrutiny, some of China’s biggest billionaires, including Mr Jack Ma, have lined up to pledge billions of dollars to charity.

The pledges hold out the prospect, endorsed by Mr Xi in a meeting last month, that China is now affluent enough to shift closer to the Communist Party’s long-standing ideal of wealth sharing. For Mr Xi, the Communist Party’s long-term authority is at stake.

Now that economic growth is moderating, many young Chinese feel that upward mobility is diminishing. Well-paying white-collar jobs can be hard to find. Tech workers complain of punishingly long hours. Families feel they can’t afford to have more children, adding to a looming demographic crisis. For now, Mr Xi faces little opposition, but longer term, that could turn if such grievances pile up.

“Achieving common prosperity is not just an economic issue; it’s a major political matter bearing on the party’s foundation for rule,” Mr Xi told officials in January. “We cannot let an unbridgeable gulf appear between the rich and the poor.”

The party is keen to show it is listening to the complaints as Mr Xi lays the groundwork for a likely third term as the party’s general secretary beginning next year. He wants to stave off doubts about his claim to another term by arguing that the party can deliver social progress while rivals like the United States stagnate in inequality, said Mr Christopher Johnson, a former US government analyst of Chinese politics​​.

“While there’s no opposition that’s going to stop him, he’s got to deliver a report card,” said Mr Johnson, now president of advisory firm China Strategies Group.

“Xi sees doing something on income inequality and the wealth gap in China as vital in this struggle of global narratives with the U.S. and the West in general.”

To China’s leaders, the new emphasis targets economic needs as well. The country’s top one per cent own nearly 31 per cent of the country’s wealth, according to Credit Suisse Research Institute, up from 21 per cent in 2000. (The top one per cent in the United States own about 35 per cent, according to the study.)

By spreading wealth more evenly, the Communist Party says, more Chinese would have the spending power to drive the economy and reduce China’s reliance on Western capital and know-how, creating the foundation for a new stage of growth.

Mao Zedong used the phrase “common prosperity” in the 1950s, in the early stages of pushing China toward socialist collectivisation that culminated in a disastrous Great Leap into communism. In the 1980s, Deng said that China should let some get rich first to lift the economy, but that “common prosperity” was the distant ultimate goal.

Mr Xi has also tried to avoid igniting expectations of overnight transformation. After declaring last year that China had eradicated extreme rural poverty, he has said the country must make “substantive progress” on achieving “common prosperity” by 2035.

An early test of Mr Xi’s ambitions will be in Zhejiang, a province on China’s east coast, which he has picked to establish “common prosperity” demonstration zones. The Zhejiang government recently released a 52-point plan to achieve common prosperity, which sets out broad targets.

By 2025, the average disposable income per person across Zhejiang must reach around US$11,500, according to the plan, over 40 per cent higher than current levels. The province could promote collective bargaining to give employees a stronger voice in wage negotiations, Dr Li Shi, an economics professor at Zhejiang University in eastern China who has advised officials on the plans, said in a recently published article in a national newspaper.

Dr Li said the province could also promote policies to give workers shares in company profits.

The income gap is all too apparent to some residents in Zhejiang’s capital, Hangzhou, once a picturesque backwater that now is home to luxury cars, fashion shops and high-end apartments.

“There’s too much pressure on the middle class,” said Ms Nancy Sun, a software programmer in Hangzhou, whose family in Zhejiang sells cement. She was preparing to marry and maybe have two children, she said, but felt daunted by housing and education costs.

Faced with a rapidly aging population, the government has begun to encourage each couple to have three children after decades of harsh one-child limits, but like many young women, Ms Sun was not interested.

“No, the economic pressures are too much,” she said.

Even in relatively wealthy areas, some say it is time to spread public spending more evenly and make more school places and medical beds available outside big, privileged cities.

“The best doctors are all concentrated in Shanghai and Beijing,” said Ms Yuan Jiameng, a Zhejiang native working in Beijing who said she recently searched for treatment for her father for a stomach ailment.

To her, the notion of “common prosperity” remained distant. “In real life,” she said, “they’re not words that we use much.”

This article originally appeared in The New York Times.

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