President Xi Jinping turns his fire on China's rich in push to redistribute wealth

Hong Kong(CNN Business) Chinese President Xi Jinping this week issued a bold new pledge to redistribute wealth in the country, piling more pressure on the country's richest citizens and businesses.

Xi told top leaders from the ruling Chinese Communist Party on Tuesday that the government must establish a system to redistribute wealth in the interest of "social fairness," according to a summary of the speech published by Xinhua, the official state news agency. He said it was "necessary" to "reasonably regulate excessively high incomes, and encourage high-income people and enterprises to return more to society."

The Xinhua article did not include many details about how Xi hoped to accomplish this goal, but did suggest that the government could consider taxation or other ways of redistributing income and wealth.

Xi even invoked the need for "common prosperity" among the Chinese people as critical for the Party to maintain power, and transform the country into a "fully developed, rich and powerful" nation by 2049, the 100th anniversary of the existence of the People's Republic of China.

"Common prosperity is the prosperity of all the people," Xi said during the leadership's economic meeting, which is hosted every few months to determine policy. "Not the prosperity of a few people."

A significant phrase

That phrase carries a lot of historical significance in China, and Xi's use in the context of wealth redistribution calls to mind its use by Chairman Mao Zedong in the middle of the last century as the former Communist leader advocated for dramatic economic reforms to take power away from rich landlords and farmers, the rural elite.

Mao ruled the country through great economic and social transformation and upheaval. His death in 1976 marked the end of the Cultural Revolution.

Afterward, China embarked on decades of economic liberalization under the leadership of Deng Xiaoping.

Deng adopted his own use of the phrase "common prosperity" as the country embraced free market principles in China's socialist economy, and opened up the world's largest Communist country to the West.

The former Chinese leader famously told a visiting delegation of American corporate executives in 1985 that "some areas and some people can get rich first, and then lead and help other regions and people [get rich], and gradually [we] achieve common prosperity."

Over the years, China has transitioned from a poor country to the world's second largest economy and one of its greatest forces in business and technology. Its rapid growth could help it overtake the United States as the world's largest economy within a decade.

Growing inequality

But while the country's private sector and amount of wealth has exploded — in 2019, the number of rich Chinese surpassed the number of rich Americans for the first time — gaps between rich and poor and rural and urban citizens in China have worsened.

That problem appears to have vexed Xi. On Tuesday, he admitted that the Party "allowed some people, some areas to get rich first" following its economic reforms dating back to the 1970s.

But since 2012 — when Xi assumed office — he said the central government has made "realizing the common prosperity of all people in a more important position."

Xi's focus on wealth redistribution ties into his government's broader goals for the economy. In recent months, the country has embarked on an unprecedented crackdown on tech, finance, education and other sectors in the name of stemming financial risk, protecting the economy and stamping out corruption.

His government has also cited a need to safeguard national security and protect the interests of its people. Regulators have widely blamed the private sector for creating socioeconomic problems that could potentially destabilize society and affect the Party's grip on power.

The crackdown on private enterprise has rattled global investors and stoked fears about the prospects of innovation and growth in China's economy.

The country's economy already has showed signs of weakness lately. Data released Monday indicated that the country's recovery is slowing, and the unemployment rate among young people has spiked to the worst level in a year.

Economists have attributed to the slowdown to an array of factors, including the fast spread of the Delta variant, natural disasters, growing debt risks, and waning investor sentiment on the heels of the regulatory clampdown.