More information and comments emerged this week about the “common prosperity” policy, aimed at creating a measure of wealth distribution to make Chinese society more equal. The government has basically decided, it seems, not to use taxation as a means of achieving this goal, and it is true that the rich can always find loopholes in tax laws and regulations. Instead, information emerged about what is called “Third Distribution” under which wealthy people and companies are encouraged to donate part of their assets to the great common prosperity pot. Philanthropy that is to one extent or another voluntary. But how much would be appropriate? It will be for the authorities to decide.
The initial reaction, as we sense it, of what we shall call the “upper middle class” is that they understand the motives of the policy, and there is concern about what it will mean for them in specific terms. So much of the wealth of these people in China is held in shares in listed companies, companies which will be required to make contributions impacting on bottom lines and therefore share prices and therefore wealth levels. One Chinese official was even moved to tell a news briefing that the purpose of the policy was not “killing the rich.”
More of the top private companies and their founders donated large sums to the pot. Many more will follow. This is a good policy to get out in front of. The question is how far the negative perceptions out there are actually going to become a reality. As of now, we don’t know.
Have a great weekend.