China’s new “common prosperity” goal is gaining the support of the country’s big men who have been caught in the web of policy shifts recently, and are working hard to appease the Chinese Communist Party.
Increasing number of business leaders in China have pledged to support President Xi Jinping’s campaign – among them is Alibaba. The e-commerce giant is throwing 100 billion yuan ($15.5 billion) into the “common prosperity,” goal, augmenting the pledge from other Chinese companies including Tencent and Pinduoduo.
These companies are acting in response to Xi’s call last month for “reasonable adjustment of excessive incomes” urging high income groups and businesses to “return more to the society.”
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Alibaba said the fund will be invested in these five key areas by 2025: innovation in technology, economic development, the creation of “high-quality employment,” supporting vulnerable communities, and setting up a special development fund.
“Alibaba is a beneficiary of the strong social and economic progress in China over the past 22 years. We firmly believe that if society is doing well and the economy is doing well, then Alibaba will do well,” Chairman and CEO Daniel Zhang said in a statement Friday.
“We are eager to do our part to support the realization of common prosperity through high-quality development,” he added.
The tech giant will also set up a “Prosperity Advancement Working Committee,” that will be headed by Zhang.
Alibaba’s plan includes other 10 specific goals which involve increasing technological investment in the country’s less developed regions, improving the welfare of gig economy workers and working to speed up the growth of small businesses and agriculture.
Similarly, other major Chinese tech firms, Pinduoduo and Tencent are donating toward the goal. Pinduoduo pledged to hand over its entire profit for the last quarter to rural development projects in the country.
The e-commerce company said last Tuesday that it would donate $372 million to the development of China’s agricultural sector and rural areas, with plans to give away 10 billion yuan ($1.5 billion) toward similar causes overall.
The move was notably bold for Pinduoduo. Per Nikkei, the US-listed firm had just posted a profit for the first time as a public company in the quarter ended June.
Following the growing trend, Tencent announced last month that it would dedicate 50 billion yuan ($7.7 billion) toward achieving Beijing’s goal of “common prosperity.” The company said it would aim to help increase income for the poor, and address education inequality, among other initiatives.
The bottom line
The “common prosperity” goal is a segment of policy changes that Beijing has, without warning, unveiled recently. And it came with an avalanche of impacts that are sweeping through China’s tech ecosystem now.
Last year, when Chinese authorities abruptly halted proposed Ant Group’s IPO, which would have toppled Saudi Aramco’s world’s largest IPO record, many companies in China didn’t know it’s the beginning of an elaborate crackdown that would take them by storm and spiral into redistribution of wealth.
As Beijing opened the chapters of the crackdown, many of the companies found themselves in paragraphs written with unfavorable ink for issues ranging from anti-competition to misuse of private data.
Since this year, many companies including Alibaba which was hit with a record $2.8 billion fine for acting like a monopoly, Tencent, Didi etc. have received a stroke of disapproval from market regulators who handed the firms fines and sanctions.
However, the bottom line appears to be getting clearer, China doesn’t want a class of rich people separated from others by miles of wealth. Consequently, it dawned on the South Asian giant, when last year, Jack Ma dared to criticize its policies, that it’s time to slash the burgeoning wealth before its over-bloated beneficiaries get intoxicated by it and forget what China stands for.
For Chinese companies and business leaders, the only choice is to say yes and accept every condition given. When in April Alibaba was handed the $2.8 billion fine, the company could only say thank you, promised to make amends and to cooperate with the authorities, while in the US, its counterparts are in courts challenging regulators’ decisions.
With no freedom to question the decisions of the authorities, business leaders in China have learnt that the easiest way to survive in their clime, where the control of everything belongs to the Communist Party, is to sing along every chorus orchestrated in Beijing – and “common prosperity” is the latest.