In the 1980s, Chinese leader Deng Xiaoping made the conscious decision to let some of its citizens get rich in capital markets to strengthen the economy. Now, nearly forty years later, Chinese President Xi Jinping announced it is time to move the nation into a time of “common prosperity” where the wealthy must share their success with those less fortunate.
China’s Push for “Equality”
Over the past eight months, Jinping has used the term “common prosperity” 65 times during public speeches and meetings with top officials. This message marks a clear change in policy for the leader, signaling the nation’s move to an even more socialist structure. The government pledged to redirect funds to both improve and lower the cost of schools, housing, and healthcare around the nation, especially in rural communities.
Under this newfound pressure from the government, some of China’s billionaires donated to charities to show their support for the president’s plan. Current tallies show that just the top seven Chinese billionaires donated $5 billion to philanthropies this year alone.
What Will China Lose in the Name of Prosperity?
As Jinping calls for wealthy citizens to disperse their worth, there will likely be far-reaching consequences. In the beginning, it is likely that certain services, like healthcare, will be more widely available. However, this comes at a cost.
Entrepreneurs and inventors will likely have less drive to innovate if they don’t have a chance at making millions through their creations. Similarly, will the lower and middle classes be less driven to work hard if they receive handouts from the government and wealthy donors?
The flipside of this dependence is that it may force the lower classes to be more compliant with government mandates if the same government also pays for all their healthcare, education, and housing needs.
Securing the Chinese Communist Party’s (CCP) Future
The gap between China’s wealthiest people and its least wealthy has been getting bigger every year, with the nation’s top 1% currently owning almost 31% of the country’s overall wealth. This income inequality, if gone unchecked, could reflect poorly on President Xi Jinping in the future.
While no one is currently challenging the CCP General Secretary in the upcoming election, Jinping is looking for ways to gather more support should a competitor arise in the coming years. If Jinping can truly deliver a “common prosperity” to his people, he would likely secure his place as General Secretary for a third and potentially fourth term.
It’s All a Give and Take
Jinping’s move to redistribute wealth in his nation could prove dangerous. Many people have seen how the side effects of a socialist economy wreak havoc on a nation’s equality and economy over time. Jinping may believe this is the right move for his country now, but it also has the potential to cripple Chinese innovation and the economy right along with it.