The company maintains that it is one of the beneficiaries of the country’s economic progress and that “if society does well, and the economy does well, then Alibaba does well.”
Its rival, tech giant Tencent, has also taken up the cause and promised to contribute. US$7.75 billion.
Alibaba boss Daniel Zhang has promised to dedicate funds from his company. Credit: Getty Images
The Chinese corporate fabric is eager to show its commitment to the dictates of the Chinese Communist Party (CCP), but when the push for companies to adhere to President Xi Jinping’s new vision began, it produced “a certain shock,” as a representative of one of China’s leading companies told me privately.
“But then we got used to the idea. It’s not about stealing from the rich. It is about restructuring society and building a middle class. At the end of the day, we’re consumer-based businesses, so it’s good for us.”
The luxury sector could be harmed
If “common prosperity” means paying more attention to China’s emerging middle class, it could be a “boom” for companies that serve these consumers.
“We see that the idea of prioritizing young people getting jobs is a good one,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China.
“If you feel part of the social mobility in the country, which had been suffering, it is good for us. Because when the middle class grows, there are more opportunities.”
The growth of the middle class has increased the consumption of luxury goods. Credit: Getty Images
However, businesses linked to the luxury sector may not do so well, Wuttke warns.
“Chinese spending accounts for around 50% of global luxury consumption, and if China’s rich decide to buy fewer Swiss watches, Italian ties or high-end European cars, the sector is going to take a hit.”
But while acknowledging that China’s economy needs critical reforms to increase what an average Chinese earns, Wuttke says “common prosperity” may not be the best way to achieve that goal.
Steven Lynch of the UK Chamber of Commerce in China also doesn’t think this plan is a guarantee that the middle class will grow in the same way it has over the past 40 years.
Lynch likes to tell a story about how much the Chinese economy has grown in recent decades.
“30 years ago, a Chinese family could have a bowl of noodles once a month. 20 years ago, possibly once a week. Ten years ago, they started being able to eat noodles on a daily basis. Now, they can also buy a car,” he tells me by phone from Beijing.
Credit: Getty Images
But Lynch points out that the plan for common prosperity has so far yielded no concrete results, beyond the efforts adopted by Alibaba and Tencent.
“There are a lot of instant regulations that emerged in many sectors,” he says, referring to the Chinese government’s recent measures to control tech companies. “That causes uncertainties and raises questions: if they look inward, then do they really need the rest of the world?”
The New Socialism
In essence, common prosperity seeks a more equitable Chinese society, at least so says the Communist Party. And that could transform the meaning of socialism in the global context.
“China wants to avoid the polarized society that some Western countries have and we have seen that they lead to deglobalization and nationalization.”
But experts argue that if the Party seeks to transform Chinese socialism into an alternative model for the rest, then common prosperity is not the way.
“It’s part of the shift to the left and toward greater control that has characterized the Xi Jinping period,” says George Magnus, a researcher at the University of Oxford’s China Center.
For Magnus, common prosperity does not mean replicating a European-style model of social welfare.
“The implicit pressure is to meet the Objectives of the Party,” he says. “There will be taxes on high and ‘unreasonable’ incomes and pressure for private firms to make donations to achieve the CCP’s economic goals, but not a big move toward progressive taxation.”
The Chinese government seeks an increase in the middle class. Credit: Getty Images
A utopian China
It has become clear that common prosperity will be one of the axes around which state government and society in China will pivot. under Xi’s command.
With it comes the promise of a more egalitarian society and a larger and richer middle class.eza, as well as companies that reinvest part of their profits.
It will be a kind of utopian China that the CCP hopes will show up as a viable alternative model to what the West offers the world.
But it has another aspect, more control in the hands of the Party.
China has always been a difficult environment for foreign companies.
Common prosperity means that the world’s second-largest economy has become an even harder space to navigate.
