IE 11 is not supported. For an optimal experience visit our site on another browser.

China created more billionaires than the U.S. Now it is cracking down.

"This is an opportunity to portray itself as a forward-thinking government that cares about its citizens," said Austin Strange of the University of Hong Kong.
Get more newsLiveonNBC News Now

Communist China has relentlessly pursued economic growth for decades, creating more billionaires than the U.S. and lifting 800 million people out of poverty but leaving 600 million more to live on $150 a month.

Now, President Xi Jinping is planning what some experts say would be a dramatic about-face, trying to restructure Chinese society by cracking down on the country's newly minted super-rich and redistributing wealth more evenly among the population of 1.4 billion.

The drive involves plans to "regulate excessively high incomes" and "encourage high-income people and enterprises to return more to society," according to a readout of Xi's comments at a meeting of the Chinese Communist Party by the state-run news agency Xinhua.

While his slogan of "common prosperity" was hardly new among Chinese leaders, Xi's speech last month was the starkest example of his apparent plan for a reshaped society.

Some experts say that, for the party, a self-preservation rationale is behind the goal of better income equality. For years the Communist Party has staked its legitimacy on growth that has outpaced that of any other major economy; now that it is slowing, it may feel it has to offer a new promise: equality.

Image: Chinese Women view the bags they bought at a Louis Vuitton flagship store Shanghai, China.
Women look at bags at Louis Vuitton's flagship store Shanghai.China Photos / Getty Images file

"China's government is aware that both domestic and international audiences are watching," said Austin Strange, an assistant professor of politics at the University of Hong Kong. "This is an opportunity to portray itself as a forward-thinking government that cares about its citizens, including those near the bottom of the wealth distribution."

As part of the Communist Party's sweeping vision for the future, the government has enforced a regulatory crackdown against Chinese tech giants that sent Western financial markets into a spin.

But the efforts extend beyond the economy, including limiting video gaming hours for minors to trying to stamp out a fan culture in which teenagers "blindly idolize celebrities," as the hawkish, party-controlled newspaper Global Times put it last week.

The message resonates with Cao Xinyin, 19, a college student in Beijing whose demographic — university-educated urbanite — the Communist Party is eager to keep on its side.

"Common prosperity means that everybody can live a high-quality life," she said. "People will live a healthier life, be better behaved, have a happier mood and will be more likely to pursue and realize their dreams."

Download the NBC News app for breaking news and politics

Others aren't convinced.

Shaun Jiang, 28, the former owner of an education company in the southwestern city of Chengdu that recently closed, said common prosperity was little more than a political slogan, lacking "a clear road map and feasibility."

Either way, Xi's attempts to control the market are unprecedented, said Bill Bikales, a New York-based economist who spent years in China working on economic policy at various U.N. agencies.

"It's quite an extraordinary situation," he said. "What's surprising is the extent to which Xi thinks that the role of the market can be restricted and restricted and restricted again."

Political legitimacy at stake

Xi's latest effort at state intervention might seem unsurprising for a one-party communist state. But since the 1970s, China has turned away from the Marxist zeal of Mao Zedong and embraced reforms that opened up its economy and helped transform it into the global powerhouse of today.

Image: An apartment building in Chongqing, the largest municipality in southwest China.
An apartment building in Chongqing, the largest municipality in southwest China.Zhou Zhiyong / AP file

More than 800 million people have been lifted out of extreme poverty since 1978, according to the World Bank, and more than half the population is considered middle-class. There were 1,058 billionaires living in China last year compared to 696 in the U.S., according to the Hurun Report, a Shanghai-based organization that tracks China's wealthy population.

But although forecasts predict that China's economy could overtake the U.S.'s in size as early as 2028, the country also has one of the highest levels of income inequality of any major world economy.

About 600 million people — almost twice the U.S. population — live on the equivalent of about $150 a month, Premier Li Keqiang said last year.

Jiangnan Zhu, an associate professor of politics at the University of Hong Kong, said, "The wealth disparity has been quite serious in China."

China was the only major country whose economy expanded last year, having largely eliminated the coronavirus after it was first detected there in late 2019. But in recent years there has been an overall slowdown in the country's stratospheric economic growth, which had been a "crucial pillar of the Chinese Communist Party's political legitimacy," said Strange of the University of Hong Kong.

Ryan Hass, a senior fellow at the Washington think tank the Brookings Institution, said that now that "the era of breakneck economic development is over, the Chinese leadership is shifting its focus toward improving quality-of-life issues as a new source of performance legitimacy."

Meanwhile, Beijing is under growing criticism from abroad over a wide range of issues, including its increasing military activity around Taiwan, its tightening grip on Hong Kong and its treatment of Uyghur Muslims, which the U.S. and others have described as genocide.

Image: A child eats a snack in her temporary 290 square-foot studio flat in Hong Kong.
A child eats a snack in her 290-square-foot temporary studio apartment in Hong Kong. Squeezed into the tiny apartment, her family struggles to make ends meet in the notoriously unequal city.Anthony Wallace / AFP via Getty Images

Some tech giants have responded to the government's regulatory crackdown by promising cash for philanthropic social programs.

One of China's largest companies, Tencent Holdings Ltd., has pledged $15 billion for a raft of initiatives, covering the environment to education and rural reform to technological assistance for senior citizens. Tencent said the move was a direct response to "China's wealth redistribution campaign."

Alibaba Group Holding Ltd., another Chinese tech giant, pledged a similar amount Thursday.

Along with a revamped taxation and welfare system, Xi may be planning to use those types of large charitable donations as a central driver for his reforms, said Vivian Zhan, an associate professor of politics at the Chinese University of Hong Kong.

The Communist Party has "many policy tools to regulate big companies and mobilize resources from them for redistribution and other policy goals," she said.

But the common prosperity drive still faces other challenges, such as corruption, the eradication of which has been the focus of a yearslong campaign by Xi. More than 60 percent of Chinese people still believe corruption is a big problem, according to Transparency International, a nonprofit organization based in Berlin.

"Common prosperity is a good idea, nice to hear but difficult to realize," said Qin Guiying, 52, who used to work as a farmer in Sichuan province but now works at a car wash in Beijing.

"The main problem is corruption of local officials," she said. "I think the rich people will remain rich, while the poor will remain poor because of corruption."