By Nicola Stoev
Editor’s note: The opinions expressed here are those of the authors. View more opinion on ScoonTV.
Last month Chinese tech billionaire Bao Fan disappeared. He founded China Renaissance Holdings, which had giant clients like Tencent, Alibaba, and Baidu.
Mr. Bao’s case has highlighted a phenomenon becoming more common in China; the disappearance of prominent billionaires. Fan went missing for days, and then his company announced that he was “co-operating in an investigation being carried out by certain authorities in the People’s Republic of China.”
As it has become a customary practice, no one delivers any information about either what government entity is handling the investigation or where Fan actually is.
The mystery shrouding Bao Fan’s disappearance turns up after a number of Chinese business leaders have gone missing in recent years, including Alibaba boss Jack Ma.
Inevitably, Fan’s disappearance has once again pushed the assumption that this could be one of the tools by which President Xi Jinping tightens his grip on the Chinese economy.
The disappearance came only days before the annual National People’s Congress (NPC) took place. The NPC is a rubber-stamp parliament, at which plans for the biggest overhaul in years of China’s financial regulatory system was announced.
According to BBC, in 2015 alone, at least five executives became unreachable, including Guo Guangchang, chairperson of the conglomerate Fosun International, which owns English Premier League football club Wolverhampton Wanderers.
Mr. Guangchang went missing in December of that year. His company announced after his reappearance that he had been assisting with an investigation.
Two years later, Chinese-Canadian businessperson Xiao Jianhua was picked up from a luxury hotel in Hong Kong. He had been one of China’s richest people and last year was jailed for corruption.
In March 2020, the real estate tycoon Ren Zhiqiang vanished after calling Xi a “clown” over his handling of the COVID pandemic. That same year, after a one-day trial, Mr. Ren was sentenced to 18 years in prison on corruption charges.
The most high-profile disappearing billionaire was Alibaba founder Jack Ma. The then-richest person in China vanished in late 2020 after criticizing the country’s financial regulators.
Although he donated nearly $10 billion to the “Common Prosperity Fund,” Mr. Ma had not been seen in China for more than two years, only appearing for the first time three weeks ago. He hadn’t been charged with any crimes either.
The Chinese government has always insisted that the actions taken against the country’s richest people are on legal grounds and they are aimed only at rooting out corruption.
The technology industry marked an essential growth in the time of Xi’s predecessors Jiang Zemin and Hu Jintao.
Previously, for too long Beijing’s focus had been on traditional centers of influence, such as the army, industry, and local governments.
However, keeping a tight control on these areas, Xi has widened his focus to bring even more of the economy in his grip. His Common Prosperity policy has delivered major crackdowns in much of the economy. Obviously, the technology industry is also moving to scrutiny.
“Sometimes, these incidents are orchestrated in a way to send a wider message, particularly to a specific industry or interest group,” Nick Marro from The Economist Intelligence Unit said.
“At the end of the day, it does reflect an attempt at centralizing control and authority over a certain part of the economy, which has been a key feature of Xi’s governance style over the past decade,” he added.
“Beijing remains focused on ensuring that big technology platforms and players do not develop their own brands and influence that makes them difficult to rein in and more likely to go against Beijing’s preferences,” Paul Triolo, head of China and technology policy at the global advisory firm Albright Stonebridge Group commented.
The key to Common Prosperity is the rule of law, and that principle should be applied to rich and poor alike. At least that is what’s declared officially.
The Chinese government asserts also that its policy targets narrowing the widening wealth gap, which many agree is a very important issue that could undermine the Communist Party’s position. The country faces growing social inequalities, and it is said that Xi faces mounting pressure from leftists who want to cling closer to the socialist doctrine.
President Jinping should be aware of the risks related to spooking the business representatives, and in a speech to NPC delegates two weeks ago, he stressed the importance of the private sector to China.
He also told the private entrepreneurs to “be rich and responsible, rich and righteous, and rich and loving.”
The technology giant Alibaba committed over $10 billion to help promote common prosperity initiatives in China, and set up a dedicated task force, spearheaded by its boss Daniel Zhang. The firm says it is a beneficiary of the country’s economic progress, and that “if society is doing well and the economy is doing well, then Alibaba will do well.” Rival tech giant Tencent has pledged $7.75 billion to the cause, too.
The common prosperity means an increased focus on the emerging Chinese middle class. But Steven Lynch of the British Chamber of Commerce in China says common prosperity is not a guarantee that the middle class will grow in the same way it has in the last forty years. He likes to tell a story about how quickly the Chinese economy has expanded over the last few decades. “Thirty years ago, a Chinese family could have a bowl of dumplings once a month,” he noticed. “Twenty years ago, perhaps they could have a bowl once a week. Ten years ago – that changed to everyday. Now: they can buy a car.” So far, Mr. Lynch says, common prosperity has not resulted in anything, besides the corporate social responsibility efforts that Alibaba and Tencent have offered. “There are also a lot of instant regulations sprung on a lot of sectors,” he added about the recent crackdown on technology companies. “That causes uncertainty – and raises questions. If they are turning more inward – then do they really need the rest of the world?”
It is clear that common prosperity is a major part of the Chinese state and society under Xi Jinping. Nevertheless, that common prosperity could hardly drive a development for a social group as middle class within a totalitarian society in which most of the corporate assets (56%) belong to state-owned enterprises and any rapid increase of the workers’ wages leads to diminishing of the export competitiveness if the GDP growth slows down. Currently, the average salary in China is identical to the ones in Eastern Europe. Moreover, if employees and workers combined make up the middle class (slightly above 780 million persons in total), how can they then identify the industrial proletariat producing above 30% of the GDP, amounting also to millions of people, among the Chinese workers which get monthly salaries under the industrial average of $1,119? Furthermore, why should a middle class be deliberately built, if the average salary in China is $1,293 per month, but Chinese spending accounts for about 50% of luxury consumption globally?
“If China’s rich decide to buy less Swiss watches, Italian ties and European luxury cars then this industry will take a hit.” according to Mr. Joerg Wuttke, president of the EU Chamber of Commerce in China. To top it off, the Chinese GDP per capita ($12,556 in 2021) is quite modest and it is even smaller than the one in most Eastern European countries, while the minimum monthly salary in China is just $376. But the Chinese consumer prices are also lower compared with most of their western analogues. Could all that be a fundament of “common prosperity” then?
Mr. George Magnus, associate at the China Centre at Oxford University, points out that common prosperity does not mean replicating the European social welfare model. “The implicit pressure is to comply with the Party’s goals,” he says. “There will be tax on high and ‘unreasonable’ incomes, and pressure on private firms to donate to Party economic objectives,” he adds, “but no big move towards progressive taxation.”Subscribe to get early access to podcasts, events, and more!
