Communist Party of China: State capitalist campaign for „common prosperity“

Communist Party of China: State capitalist campaign for „common prosperity“

In assessing the character of the CCP, whether it is a Confucian party or a Marxist-Leninist party, one should take into account Professor Van Ess‘ programmatic essay „How Confucian is China?“ In which he denies this, even though he thinks that the CCP was a Leninist party. Against this is the fact that the CPC no longer wants an international proletarian world revolution like Lenin, rejects class struggle, its membership structure would no longer be that of a workers‘ party and, above all, its economic policy, which, with the exception of the role of the state, is very economically liberal, especially far beyond Lenin’s New Economic Policy at that time and does not even correspond to the left-wing economic demands of the German Left Party and the progressive Democrats around Bernie Sanders and Alexandria Ocasio-Cortez, but rather appears almost neoliberal, although Soros denies this in his articles in the Financial Times or the American Enterprise Institute or Heritage Foundation in its Economic Freedom Index. It is probably better to speak of the CCP as a state-capitalist party in a former Marxist tradition. It is also interesting how little tax revenue is in the state budget in China. Also, there is already a second generation of wealthy people in China. But the rich have not yet discovered philanthropy. The party now wants to help them to do so. In the past there were of course no taxes in China, because you don’t need them under socialism because the state allocated salaries and extracted what he needed from the state owned companies. Therefore the Chinese tax system is pretty young and might change in the future..

However, Chinese President Xi Jinping has started a campaign for „common prosperity.“. The Chinese government sees the great social and regional inequality in the country as a problem. It is questionable whether this will reduce the extreme social inequality in the country . Deng Xiaoping, who initiated the policy of “reform and opening” in 1978, already defined the goal of “common prosperity” as a core element of socialism. However, the government should allow „first some and then the others“ to get rich on the way there. Inequality was seen as an incentive for competition and growth, which the state should not limit through premature redistribution. As a result, China became a society with extreme income and wealth inequality.

According to Forbes magazine, there are now 626 billionaires in China, only in the US there are more. As Chinese Prime Minister Li Keqiang said in May last year, over 600 million people in China live on an average monthly income of 1,000 yuan, the equivalent of around 134 euros. Given the horrendous cost of housing, health and education for children in many places, this is not enough. The Chinese President and General Secretary of the Communist Party of China (CCP), Xi Jinping, mentioned the goal of adjusting „excessively high incomes“ on several occasions in his recent speeches. and called on the rich and large corporations to do more for the common good. Tech companies Alibaba and Tencent recently agreed to invest and donate over $ 15 billion each in programs for „common prosperity.“

There are various activities to reduce poverty in China. Large corporations like Alibaba, for example, participate in public-private partnerships in which they support local administrative units in poor areas. They help to teach tens of thousands of farmers how to market their products via the Internet and to set up digitalized supply chains. Wanting to reduce poverty by promoting the commercialization of agriculture and entrepreneurship is a neoliberal program. The Chinese government is putting great pressure on rich people and corporations to support such programs. When US billionaires Bill Gates and Warren Buffett invited 50 wealthy Chinese to a meeting in Beijing in 2010 to convince them of philanthropy, most of them reacted cautiously. The paternalistic tradition of state socialism and the „wild capitalism“ of the early years of „reform and opening“ had not encouraged the inclination to make large private donations.

 In the meantime, the government is propagating the model of entrepreneurship that combines the pursuit of profit with philanthropy. In December of last year, Xi demonstratively visited the Nantong Museum, founded by the major entrepreneur Zhang Jian (1853–1926) in the eastern Chinese city of the same name. Zhang used his fortune to help set up several universities. Redistribution through taxation has so far not played a major role in China. According to the International Monetary Fund, the share of tax revenue in the gross domestic product in China is 28.2 percent, less than in the USA (31.8 percent) and the average for the OECD countries (40.3 percent). The government still generates a large part of the state revenue from the state sector and monopolies. An inheritance tax has been discussed several times, but has not yet been introduced. After the extensive expropriations of the Mao era, a new class of capitalists emerged in the 1980s. Quite a few of the new capitalists had gone from poor peasants to millionaires. There is now a so-called second rich generation who inherited their fortune from their parents.

In China, there is currently no uniform tax on property ownership. The government has made Shanghai and Chongqing model cities to test the effects of the introduction of such a tax. Local experimentation with pilot projects is common in China before the central government decides on a nationwide measure. In Shanghai, the tax rate was set at 0.4 to 0.6 percent of the property’s last sale price, but this only applies to luxury properties. In China, however, only the property belongs to the owners; the land is state property. For the local administration, leasing the land is a key source of income – it is unlikely that they would have an interest in more regulation of the real estate sector, even though they are supposed to build more social housing at the behest of the state.

 The central government has made the province of Zhejiang a model for achieving “common prosperity”. More than 57 million people live in the province, it is one of the developed areas of the country. Alibaba is based in the provincial capital Hangzhou. According to the official plan, the province should have achieved the level of gross domestic product of a moderately developed state by 2025, ten years before the entire country. The number of people with middle incomes is to be increased. According to the plan, private and public investment will create millions of start-ups and innovative businesses in the province, as well as five million new jobs in cities. The aim is also to increase the urbanization rate and commercialize agriculture in order to weaken the contrast between town and country. In this future version there is no longer any space for the self-sufficient small peasants. Another element of the strategy is promoting education. In the province, 70 percent of a year of study age are expected to attend a university, significantly more than in Germany at the moment. The problem of unaffordable apartments caused by high real estate prices is to be solved, among other things, by the construction of 210,000 subsidized rental apartments. The plan makes it clear that the government continues to see economic growth and investment in infrastructure as the path to „common prosperity“, but does not plan any extensive social redistribution.

Since Jack Ma, former CEO of Alibaba, disappeared from the public for a few months at the end of last year and the government began to regulate several industries more tightly, there has been speculation at home and abroad that the government is opposing under the label of „common prosperity.“ that the super-rich can expand or even plan expropriations. The website of the official Chinese People’s Daily tried to reassure in late August that the party had no plans „to kill the rich to help the poor.“ The fact is, it was the CCP and the state media that helped billionaires like Jack Ma to become heroes in China. With Alibaba, a monopoly-like corporation has emerged that dominates digital trade. In addition, 70 percent of the population use the Group’s own Alipay app to pay. Subsidiary Ant Group has provided loans to over 20 million small businesses and around half a billion individuals, largely backed by state banks.

 In the meantime, the government seems to want to curtail the group’s economic power. In April, authorities fined Alibaba the equivalent of US $ 2.8 billion. It was recently announced that the Chinese internet supervisory authority is planning new rules against manipulation of algorithms, rankings and customer ratings in online sales, as well as an upgrade of user data protection. So far, the government had done little to make the population even aware of data protection. Contrary to what some believe, however, these measures have little to do with a “Red New Deal” or a return to Mao’s socialism. Like many developed capitalist states, China also sees itself compelled not to let the economic power of the tech corporations grow beyond limits. Establishing measures with the aim of „common prosperity“ is nothing new, however. The government under President Hu Jintao (2003-2013) already wrote the slogan on its red flags. It changed labor law slightly in favor of the employees, promoted the reconstruction of a rural general health insurance system and invested in infrastructure as part of the campaign for the »new socialist village«. However, towards the end of Hu’s reign, social inequality had grown. Therefore it remains to be seen, if Xi´s common prosperity will prevail, also in case of a financial crisis and further escalation of the Sino-American conflict.

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