China’s drive for “common prosperity” seems endless. President Xi Jinping has spent years trying to reduce inequality in the world’s second-largest economy. “That doesn’t mean killing the rich to help the poor,” said one government official. But events seem to suggest the opposite. This policy has become China’s main focus after reports of discontent within the party committee over the rise of a new class of wealthy businessmen.
The question then is: Why are Chinese billionaires 500 billion poorer than last year?
Setting income limits. Statutory income should be protected, but China should “rationally adjust excessively high income,” the government proposed. High-income groups and companies are also encouraged to contribute more to society. “China must guard against falling into the welfare trap. Those who get rich first should help those behind, but hard work should be encouraged. We cannot expect help or depend on others. We cannot support the lazy,” they said.
Reforms four decades ago that unleashed China’s market economy allowed for the accumulation of great personal wealth, with hundreds of billionaires minted in the still supposedly socialist country, deepening inequality, especially between urban and rural areas. Now investors have been rattled by a series of measures, including a crackdown on various industries, aimed at curbing cost-of-living pressures, as well as tougher antitrust and data protection rules.
The rich, less rich. As a result, the country’s richest tycoons have already seen their wealth decline. Tencent founder Pony Ma’s net worth has plummeted 19% since 2020, according to data from Hurun. Alibaba founder Jack Ma’s wealth plummeted 36% in the same period, pushing Ma from first to fifth on the rich list. The combined net worth of China’s two dozen tech and biotech billionaires has fallen 16% since the end of June, according to an analysis by the Financial Times.
Suffice to say, 87 Chinese citizens have disappeared from this year’s Forbes billionaires list in the wake of the government’s crackdown on tech companies in the country. In total, Chinese billionaires are more than 500 billion poorer than they were a year ago. Of the 10 most affected billionaires, those who saw their net worth shrink the most, eight were from China.
blow to education. At this time last year, TAL Education’s Zhang Bangxin was worth $13 billion. Today, his wealth has plummeted by 94% and is worth $890 million. Similarly, Larry Xiangdong Chen, founder of industry rival GSX Techedu, lost $15 billion in just six months between January and July last year, and is now reportedly worth $235 million.
This dramatic drop in wealth was the result of the Chinese government’s crackdown on the country’s after-school tutoring industry, which it accused of causing unnecessary stress to young children. In July, Beijing upended one of the country’s most lucrative sectors by announcing a complete ban on for-profit classes taught by tutoring institutes in academic subjects.
Against excessive wealth. The fact that billionaires are taking on Chinese regulators is no accident, and it has come as President Xi Xinping has spoken publicly in recent months of curbing “excessive” wealth in pursuit of “common prosperity.” In addition to the education sector, internet companies have also found themselves in the regulatory crosshairs, with online retail giant Alibaba fined $3 billion for monopolistic practices.
Real estate in decline. The wealth of real estate tycoons has also plummeted along with the prospects for their industry. Beijing has taken on debt across the sector, preventing over-leveraged developers from taking out new loans. For the first time since the Forbes list was launched in 1999, there are no real estate moguls in the top 10. Xu Jiayin, chairman of indebted real estate giant Evergrande, slips to 70th place from fifth.
The Rise of the “Green” Billionaire. However, China’s push to decarbonize its economy by 2060, a goal President Xi Jinping announced at the United Nations in September 2020, has fueled a rise in the wealth of the country’s green entrepreneurs, according to the Hurun Rich List. A boom in new energy entrepreneurs, sparked by carbon reduction targets, as well as a spate of new tech-related company listings pushed 20% more Chinese individuals to the list.
According to the Hurun Rich List, eight of the 10 fastest-growing wealthy people are involved in the “new energy” business, including Zeng Yuqun, founder of battery maker CATL. While green technology is on the rise, fueled by Beijing’s decarbonization effort, the country’s internet giants are in decline, crushed by a government crackdown on data practices and monopolistic behavior in the sector.
Image: GTRES