How come there are so many billionaires in communist China?
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It’s official now that Jack Ma, chairman of the Chinese e-commerce giant Alibaba Group Holdings, is a member of the Communist Party.
He’s also the richest of a growing gaggle of high-net-worth individuals in China, who between them control $6.5 trillion.
The story of how China’s Communist Party, long an opponent of capitalist ideology, created one of history’s greatest breeding grounds for personal wealth begins four decades ago when then party patriarch Deng Xiaoping introduced reforms that would drastically transform the country into the world’s second-biggest economy.
1. How many billionaires does China have?
The Bloomberg Billionaires Index tracks the wealth of the 500 richest individuals globally, 38 of whom are Chinese. More broadly, global wealth research firm Wealth-X found that of the world’s 2,754 billionaires, 680 (25 percent) were in the U.S. and 338 (12 percent) were in China. UBS Group AG estimates a new billionaire is minted in China every two days.
2. Why has China’s Communist Party let people get rich?
It’s a necessary evil. The party identifies among its core tasks the advancement of the fundamental interest of the greatest majority of Chinese people. Deng, who famously said poverty is not socialism, interpreted this to mean that it was okay if some people needed to get rich to improve the livelihoods of the masses. Since the introduction of his reforms, more than 700 million people have been lifted out of poverty in China.
3. Does that mean the party doesn’t care if China is communist?
The party’s constitution says its “highest ideal and ultimate goal is the realization of communism.” But it doesn’t give a time frame for achieving it, so party leaders have a lot of room to maneuver within that broader goal. That allows space for divergent views to co-exist: Mao Zedong is still revered despite disruptive moves that led to famine and bloodshed, as is Deng for embracing market forces and foreign investment. Still, it remains important for leaders to pay respects to the founding ideology: President Xi Jinping this year publicly celebrated the 200th anniversary of Karl Marx’s birth, including giving a statue to his hometown.
4. What would communism in China look like?
Officially, China views communism as a modern-day utopia: Everyone would collectively own the means of production, all citizens would work for the common good, everybody would be equal and wealth would be distributed based on need. Whether that’s realistic or not, the party has outlined stages of development needed to get there. Before communism, China must first realize socialism, which Xi has set out to do by 2035.
5. What would socialism look like?
In a speech last year, Xi said socialist modernization would mean China is a global leader in innovation, the rule of law would be in place and Chinese culture would have greater appeal around the world. People would live comfortable lives, everyone would have access to basic public services and income disparities -- particularly between urban and rural areas -- would be significantly reduced. The environment would be fundamentally improved as well.
6. So the party supports personal wealth?
It’s complicated. The party supports private business and the entrepreneurial spirit as a driver of economic growth and job creation. It’s far more ambivalent about personal wealth because of the growing income gap between rich and poor, which is not very communist. Xi has said China must reduce this inequality. One way that’s translating into policy is taxation, where officials have cut taxes on lower-income earners while pushing forward with levies on assets such as property that will increase the burden on the wealthier.
7. What risks do billionaires face in China?
Xi’s government has stepped up scrutiny of how the wealthy earned their money, and even apparently well-connected tycoons have fallen. High-profile cases include investigations into Wu Xiaohui, the founder of Anbang Insurance Group Co., and financier Xiao Jianhua, whose Tomorrow Holding Co. was ordered to divest from many of its financial assets. Some go missing: Landing International Development Ltd. saw its value plummet after its ex-billionaire Chairman Yang Zhihui mysteriously disappeared, and recouped some of that when he resurfaced three months later. Others like Guo Wengui have fled overseas: This month he teamed up with President Donald Trump’s former chief strategist Steve Bannon to raise $100 million in support of investigations into deaths and disappearances of Chinese executives, politicians and public figures.
8. Do China’s wealthy have a say?
They do. Many of China’s richest men and women are members of the country’s parliament or its advisory body. That gives them an opportunity to influence the direction of policy by submitting proposals for legislation or lobbying government officials. Some of those who have benefited from Xi’s policies, such as Tencent Holdings Ltd.’s Ma Huateng, were delegates at China’s National People’s Congress this year.Bloomberg