Entrepreneurs are scrambling to lavish tens of billions of yuan in China to respond to President Xi Jinping’s “common prosperity” appeal. Still, experts say that such donations are unlikely to stem from their sincere philanthropy, and they will possibly stop doing so once political pressure goes away. In a recent post in South China Morning Post, Jane Cai analyses the long-term impact of state-driven charitable donations in China.  

One call, billions of responses

Xi spelled out his “common prosperity” vision at a meeting with the Central Committee for Financial and Economic Affairs in August, in which he said “tertiary distribution” was one of the basic systems to address the yawning wealth gap and encouraged high-income earners and companies to “give back more to society.”

The concept of tertiary distribution was first coined by Peking University economist Li Yining in the 1990s and refers to philanthropic activities—donations, charities, and volunteering—which take place after the other forms of wealth redistribution through incomes and taxation.

While it was mentioned in the party’s 2019 and 2020 plenums and appeared in the country’s 2021-2025 economic and social development blueprint released last March, it generated little attention until Xi made his public call in the summer.

Since then, Chinese entrepreneurs have been busily setting aside special funds for the common prosperity program, lending financial support to the leadership’s top concerns: education, health care, poverty alleviation, and so on.

Last year’s total cash donations by the 100 entrepreneurs on Forbes’ China Charity List amounted to 24.51 billion yuan (US$3.8 billion), a 37 percent surge on the previous year. With donations of 7.8 billion yuan—32 percent of the total—the tech industry ranked as the country’s most charitable sector.

In the first eight months of this year, five of China’s richest tech billionaires have pledged at least US$13 billion from their personal or corporate fortunes to charitable foundations and initiatives.

Voluntary or obligatory?

Although various communist party and government organs have clarified that China’s approach to “common prosperity” is not a Robin Hood-style redistribution and said charitable donations would be voluntary, many entrepreneurs said they felt pressure to donate and fall in line with the national goal.

Tom Wang, 45, co-founder of a medium-sized manufacturing company in the eastern province of Jiangsu, said he had donated a total of 1 million yuan to several projects so far this year. “I can’t say I was forced. We entrepreneurs are invited to chat with local officials monthly. When you are publicly asked whether to donate or not, you cannot say no. They give you face by summoning you,” he explained.

“I’m glad for doing good deeds—funding public libraries, helping people affected by floods, etc. All levels of governments have been setting up charity organisations in recent years, making it easier for us to make charitable contributions. However, the air is like you don’t have good conscience if you say no. I feel a little uneasy under the pressure.”

In the eastern province of Zhejiang, which was picked as the pilot region for the common prosperity goal, dozens of party cadres posed in September for a ceremony to mark the Donation of One Day’s Salary. They were led by provincial party chief Yuan Jiajun, inserting yellow envelopes into a red donation box in front of Zhejiang Online’s camera.

David Zhou, 48, a trading company owner in the province, said: “Local government officials are actively promoting charity donations. Under such circumstances, companies have to show their support to the initiative by making donations and prove their loyalty to the party.”

“My business is not good this year and the burden is heavy to contribute to employees’ social welfare. Anyway, I’ve donated hundreds of thousands of yuan this year for various social causes,” he added.

How long will it last?

The Chinese government started to tighten its control over the dynamic internet sector last November when the initial public offering of Ant Group—an affiliate of e-commerce giant Alibaba Group—was suspended at the last minute. Later, Alibaba was slapped with a record US$2.8 billion fine for being accused of abusing its market dominance. Alibaba owns the South China Morning Post.

The unprecedented crackdown also involved games publisher Tencent, online food delivery company Meituan, e-commerce platform Pinduoduo, and ride-hailing app Didi. All were fined or had deals terminated for violations of antitrust or cybersecurity laws.

“Donations are made first and foremost for their self-preservation. What and how the donations are used are secondary to the donors,” said Steve Tsang, director of the SOAS University of London’s China Institute.

“Once the Chinese government has made it clear that it requires big corporations to donate or else, big corporations will continue to do so until it becomes clear that such donations are no longer required,” he said.

There is another factor in play. Brock Silvers, chief investment officer with Kaiyuan Capital in Hong Kong, wondered how long this donation trend could last before investors looked elsewhere for predictable corporate profitability.

“Chinese corporate support for social initiatives is a serious concern for Western investors. Despite the likely positive impact of the initiatives, billions of dollars are nonetheless being siphoned from shareholders, seemingly without much regard for their interests,” he said.

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