China abandons its focus on increasing wealth in Xi’s critical year

Xi Jinping, China’s president, Xi, waged a ferocious marketing campaign to rein in personal capital and reduce social inequalities for much of the previous year. Regulators slapped penalties on tech behemoths and wealthy celebrities. Tycoons were required to give back to society by Beijing. A new era of “common prosperity,” according to the Communist Party, was on the horizon.

The Communist Party is now putting its advertising campaign on hold. Beijing implies that Xi’s push to redistribute wealth has unnerved the private sector, a pillar of development and job creation when China’s financial outlook is bleak.

This year, which is all-too-important for Xi, Beijing is focused on keeping the economy stable and growing. As he prepares to announce a third five-year term later this year, he has attempted to portray China as more prosperous, influential, and stable under his rule. Officials have been scrambling in recent months to reverse a slowdown in development, which rising global oil prices have exacerbated, uncertainty over the Ukraine conflict, and Chinese lockdowns, which have included an unrelenting surge in coronavirus cases.

The postponement is more of a tactical retreat than a complete abandonment of Xi’s plans, which the Chinese Communist Party continues to portray as a long-term goal. Xi’s “common prosperity” marketing campaign is a pledge to close the country’s widening wealth gap and build a middle class capable of driving domestic consumption and reducing reliance on debt-fueled development. It also serves political goals, such as bolstering public support for Xi’s leadership and promoting China’s centralized management system as superior to the West.

Regulators had focused on what they called “disorderly capital expansion.” They cracked down on various businesses that they saw as widening the gap between the rich and the low-income strata, such as after-school tutoring, online financial products, and online shopping. The strikes wiped more than $1 trillion off the value of Chinese corporations, forcing many to lay off workers and even file for bankruptcy. The marketing campaign also frightened entrepreneurs and investors by asserting the party’s power over society and raising curious questions about the role of private businesses in the country’s future.

Because the economy was slowing, the social gathering’s management began signalling that the marketing campaign would be delayed. The Politburo didn’t use the phrase “common prosperity” in its official abstract when it met that month to decide on financial priorities for 2022; instead, it emphasized stability as the top priority.

Beijing also sought to reassure stakeholders such as international investors that it was still open for business. Xi himself declared that China welcomed all forms of capital and that his marketing campaign was not aimed at promoting equality. However, Beijing’s crackdown on the personal sector has continued to rattle traders both at home and abroad. As China imposed strict lockdowns to combat COVID-19 outbreaks and Russia’s invasion of Ukraine raised commodity costs, confidence in China’s economic system waned.

A sharp sell-off in Shanghai shares in recent months — the market fell 17% from mid-December to mid-March — prompted Vice Premier Liu He, Xi’s right-hand man on financial coverage, to make an unusual intervention. Liu promised that Beijing would support the economy and limit the market volatility of roiled markets. According to an announcement made by the official Xinhua News Agency, any new government policy that could have a significant impact on share prices and other monetary market activity would first need to be cleared by Liu’s financial administration team. Liu could have been implying that last year’s crackdowns resulted from officers’ overzealousness in carrying out Xi’s long-term objectives, a claim that some economists have made.

For example, Li famously recounted how officers rushed to respond to Xi’s announcement in September 2020 that China would reduce its carbon dioxide emissions from the internet to zero by 2060. Without first determining various power sources to keep exercise buzzing, local governments restricted coal funding and manufacturing and imposed restrictions on the use of fossil fuels. These strikes resulted in rolling blackouts across the country last year, briefly paralyzing many factories in September as coal-fired power plants failed to generate enough electricity.

Beijing has moreover deferred plans to expand a preliminary of a local charge that has been a spotlight of the drive to reallocate wealth. The get-together has extensively discussed presenting a nationwide property tax, which business analysts say could help the national government raise cash without holding land auctions, punishing people who buy properties and leave them empty.

China is about to embark on its most ambitious construction project since the global financial crisis of 2008. Local governments and state-run corporations borrowed heavily to help finance the construction of highways, bridges, and the Beijing-Shanghai high-speed rail line, but the national government unleashed a wave of construction spending to keep the economic engine chugging. This year, China will build eight national computing hubs, ten data centre clusters, and more high-speed rail lines.