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Chinese tech giants face uncommon conundrum amid call for ‘common prosperity’

Written by Mengyuan Ge Published on     4 mins read

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With the government looking to rein in high-income groups, the country’s tech titans “voluntarily” turn to philanthropy.

Alibaba Group has pledged to invest RMB 100 billion (USD 15.5 billion) by 2025 to support China’s vision of “common prosperity,” the company said on Thursday. This is the latest and biggest corporate pledge to answer the central government’s call of narrowing wealth inequality in the country.

Corporate China flocked to answer Chinese President Xi Jinping’s call for “common prosperity,” a term that refers to a broader distribution of wealth among all people in China. In particular, tech enterprises are engaging in major philanthropic outlays at a time when the government is tightening oversight on companies whose business involves internet platforms.

Alibaba said the RMB 100 billion will be used to foster science and technology innovation, support small and medium-sized enterprises, shore up agriculture industrialization in underdeveloped rural areas, increase youth employment, provide security for gig workers, care for vulnerable groups, and develop better social welfare for low-income workers. It will also set up a RMB 20 billion (USD 3 billion) “common prosperity development fund” to establish a pilot project for these endeavors.

Other tech companies have made similar public commitments since mid-August. This development started when President Xi stated the importance of promoting “common prosperity” at a meeting with top economic policymakers. Xi emphasized that “common prosperity” points to the well-being of all people, rather than the affluence of a minority, meaning individuals and enterprises who garner high incomes must give back to society. He also called for “adjusting” excessive incomes and making middle incomes more accessible.

China now has more than 1 billion internet users. This massive pool of consumers feeds the wealth of the country’s tech giants, which have grown at a breakneck pace in the past decade.

Their founders and top executives, many of whom are among China’s—and the world’s—wealthiest individuals, all quickly responded by mentioning “common prosperity” in public statements. By the end of August, at least 73 listed companies of Chinese origin had included the policy buzz phrase in their second quarter earnings reports, according to Bloomberg. Tech moguls who were already part of the donor class ramped up their philanthropic efforts.

On August 18, one day after Xi’s speech, Tencent said it would double its funding for its corporate social responsibility initiatives to RMB 100 billion (USD 15.4 billion). The money will be used to support people with low incomes, improve basic medical insurance coverage, and investments for developing rural areas and education at the grassroots level of society, the company said in a statement after releasing its Q2 earnings.

Wang Xing, founder and CEO of food delivery giant Meituan, said on Monday that “common prosperity” is part of Meituan’s genes, as the two Chinese characters in its name, mei and tuan, carry the meanings of “goodness” and “togetherness,” and point to being “better together.” Ahead of the curve, he donated 10% of his stake in Meituan to his philanthropic foundation in June.

E-commerce giant Pinduoduo launched its “10 Billion Agriculture Initiative” after publishing its earnings on Monday. The program includes a commitment of RMB 10 billion (USD 1.55 billion) to support rural farmers by improving food security, food safety, and agri-food technologies.

For decades, China’s policymakers have prioritized national economic growth. In the mid-1980s, Deng Xiaoping, who served as the paramount leader of China from December 1978 to November 1989, said that the nation must “allow part of the population and some regions to get rich first” while the country’s economic policy underwent reforms.

The process was a success—China is now the second largest economy by GDP, behind only the United States. But one consequence is skewed wealth distribution, where financial resources have accumulated in the hands of a rare few without benefitting broader society.

Under Xi’s leadership, the government is now attempting to reshape Chinese society in ways that are more financially equitable. “Common prosperity is the essential requirement of socialism and an important feature of Chinese-style modernization,” Xi said during his speech in August. “Achieving common prosperity is not only an economic issue, but also a major political issue that puts the party’s ruling base at stake.”

With the tech industry already facing crackdowns, its wealthiest entrepreneurs became prime targets in Beijing’s drive to rein in high-income groups.

The call for the rich to “give back to society” is not an official mandate. The philanthropic efforts made by enterprises are all voluntary, suggesting that, for now, the redistribution of wealth will take place at a tempered pace. In his speech delivered on August 17, Xi said, “Common prosperity is not egalitarianism. We should adhere to gradual and orderly progress, and have a full estimate of the long-term, arduous, and complex nature of common prosperity.”

Check this out: China cracks down on big tech

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