To reduce inequality, China targets its rich
Chinese President Xi Jinping has put China’s wealthiest citizens on notice, offering an outline for ‘common prosperity’ that includes income regulation and redistribution in a sweeping push. A look at what this means for the country’s fast-rising number o
A PROBLEM OF PLENTY
Chinese society has a massive problem of income inequality – the richest 20% earn more than 10 times the poorest 20% – and hasn’t budged since 2015. The number of billionaires in China nearly doubled to more than 1,000 in the past five years, according to the Hurun Global Rich List, 2021.
XI’S INCOME REDISTRIBUTION PLAN
A Tuesday meeting of the Central Committee for Financial and Economic Affairs, attended by Xi, outlined a series of socio-economic targets for the country. Key among them are: Expand the size of middle-income group
Grow earnings for low-income group
Prohibit illicit income for the rich
HOW CHINA TARGETS TO ACHIEVE THIS:
Make basic institutional arrangements on income distribution Strengthen the regulation and adjustment of high income Raise incomes for people down the economic pyramid Adjust excessive incomes and prohibit illicit income Encourage high-income firms and individuals
to give back to society more
THE ‘CRACKDOWN’ ON CARDS
Since Xi took office in 2012, the ruling party has made it a priority to end poverty and build a moderately prosperous society, goals that the party sees as central to promoting well-being. Beijing has undertaken massive efforts to reduce poverty, especially in rural areas. More recently, it’s taken aim at the upper end of the spectrum, with a crackdown on the technology industry, which has minted several billionaires:
TAXING PROPERTY AND INHERITANCE
Economists say Beijing is moving closer towards introducing taxes on property and inheritance. PROPERTY TAX ON CARDS? Authorities have long talked about a property tax and have conducted trials to tax residential property in Shanghai and Chongqing since 2011. A high-level meeting in May indicated officials may be making a renewed push to implement it.
EYE ON INHERITANCE: China doesn’t have an inheritance tax, and imposing one would have an important regulatory effect on wealth distribution, Shi Zhengwen, a tax law professor at China University of
Political Science and Law, was cited by financial media outlet Yicai as saying
THE ZHEJIANG EXPERIMENT
The government identified the eastern province of Zhejiang, home to Alibaba Group, as a pilot zone for the new initiatives. Last month, Zhejiang released detailed plans for raising per capita disposable income by 45% in 5 years. To achieve this, the provincial government will encourage workers to: Bargain collectively for wages
Listed companies to raise cash dividends to shareholders
Farmers to pursue entrepreneurship strategies Promotion of development of financial products to benefit residents