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China’s path to common prosperity puts pressure on private enterprise

  • Where the tech giants led, other entrepreneurs are following with lavish donations to charitable causes to meet the national goal
  • The outpouring of generosity has raised questions about the long-term effectiveness of state-driven philanthropy

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Illustration: Lau Ka-kuen

This is the final part of a series on China’s new push for “common prosperity”. Here, Jane Cai looks at the impact on the country’s wealthy.

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With wealth inequality worsening amid the Covid-19 pandemic, the world’s rich are under pressure to show their generosity.

Most famously, Tesla CEO and SpaceX founder Elon Musk and Amazon.com founder Jeff Bezos were called out by the UN World Food Programme’s director David Beasley, who said rich people like them should donate a fraction of their wealth to help fight starvation.

In China, entrepreneurs are scrambling to lavish tens of billions of yuan towards President Xi Jinping’s “common prosperity” drive – a new initiative to reduce economic and social inequality, led by the country’s technology gurus after a turbulent year which included antitrust investigations, tightened data security scrutiny and massive fines.

Xi spelt out his “common prosperity” vision at a meeting with the Central Committee for Financial and Economic Affairs in August, in which he said “tertiary distribution” was one of the basic systems to address the yawning wealth gap and encouraged high-income earners and companies to “give back more to society”.

The concept of tertiary distribution was first coined by Peking University economist Li Yining in the 1990s and refers to philanthropic activities – donations, charities and volunteering – which take place after the other forms of wealth redistribution through incomes and taxation.

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While it was mentioned in the party’s 2019 and 2020 plenums, and appeared in the country’s 2021-2025 economic and social development blueprint released last March, it generated little attention until Xi made his public call in the summer.

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