China's 'common prosperity' push does not mean 'killing the rich', official says

FILE PHOTO: A view of the city skyline from the Shanghai Financial Center building
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By Gabriel Crossley

BEIJING (Reuters) -China's drive for "common prosperity", as President Xi Jinping aims to ease inequality in the world's second-largest economy, does not mean "killing the rich to help the poor", an official from the ruling Communist Party said on Thursday.

China must also "guard against falling into the trap of welfarism", Han Wenxiu, an official at the central financial and economic affairs commission, told a briefing in Beijing.

Those who "get rich first" should help those behind, but hard work should be encouraged, he said.

"We cannot wait for help, rely on others for help, or beg for help. We cannot support layabouts."

Investors have been rattled by a series of measures, including a crackdown on several industries, that are in part aimed at curbing cost-of-living pressures, as well as tightening anti-monopoly rules and data protections.

Han said recent policies regulating internet companies aimed at irregularities and illegal behaviour, and "absolutely" did not target private companies or foreign companies.

Reforms four decades ago that unleashed China's market economy enabled the accumulation of vast personal wealth, with hundreds of billionaires minted in the still avowedly socialist country, deepening inequality, especially between urban and rural areas.

The high cost of urban living, meanwhile, has contributed to a sharp slowdown in births, prompting China this year to allow families to have up to three children instead of two. Slowing economic growth and cutthroat competition have also prompted some young urbanites to embrace a passive attitude known as "lying flat".

EXCESSIVE INCOMES

Legal income should be protected but China should "rationally adjust excessively high" incomes, according to a meeting chaired by Xi earlier this month. High-income groups and firms are also being encouraged to contribute more to society.

Charitable giving should be encouraged through taxation policies and can improve the "distribution structure", but donations were "not compulsory", Han added.

Several tech industry heavyweights have recently announced major charitable donations and support for disaster relief efforts. Online gaming giant Tencent Holdings said this month it would spend 50 billion yuan ($7.71 billion) to promote "common prosperity."

"More big corporations are going to set up social responsibility funds if they have yet to do so, and the size of donations from them should increase," Iris Pang, chief economist for Greater China at ING, said in a note this week.

"Corporates need to take bigger steps to enhance their corporate governance and social responsibility. They need to work to get ahead of the regulators."

China's wealthy eastern province of Zhejiang, which is a "demonstration zone" for common prosperity, also announced Thursday that by 2025, rural residents should have on average annual disposable incomes of 44,000 yuan per year.

That compares with average nationwide rural disposable incomes of just over 17,000 yuan in 2020, according to official data.

($1 = 6.4830 Chinese yuan renminbi)

(Reporting by Gabriel Crossley; Editing by Himani Sarkar and Tomasz Janowski)

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