China’s Big Tech vows to give back as Xi touts ‘common prosperity’
HONG KONG — China’s top internet companies have pledged billions of dollars for social goods in response to President Xi Jinping’s call to share their wealth, in a sign of the big politically driven change in a sector already hit by Beijing’s regulatory crackdown.
Philanthropic and investment commitments have been unveiled this year by companies ranging from Tencent Holdings to online retailer Pinduoduo and top executives including Wang Xing of food delivery platform Meituan and Lei Jun of smartphone maker Xiaomi. These efforts will fund areas such as research, agriculture and clean energy.
The pledges come as Xi ratchets up rhetoric about “common prosperity” — which includes income regulation and redistribution — and bids to narrow the yawning income inequality gap in the world’s second-largest economy.
Businesses have shifted noticeably. After reporting first-half earnings, large companies such as Alibaba Group Holding and online retailer JD.com focused on plans to create value for society instead of profits, spooking investors already worried by Beijing’s regulatory crackdowns. Analysts are trying to gauge whether the shift represents a serious threat to corporate bottom lines, or whether investments ultimately will rebound to companies’ benefit.
“A new regulatory environment is being created, one that will impose more limits on internet firms’ growth and profitability, and increase state control,” Ernan Cui, an analyst with research company Gavekal Dragonomics, wrote in a note to clients Thursday. Chinese authorities now treat these businesses more like “essential infrastructure providers” that require tight supervision.
Last week, Tencent pledged 100 billion yuan ($15.4 billion) to fund social responsibility projects in areas from basic science research and education to clean energy, with half dedicated to a “common prosperity” fund that focuses on improving the livelihood of China’s low-income earners.
As a tech company that “benefited from China’s economic reform, Tencent is always exploring ways to … better give back to society,” it said in a statement.
Pinduoduo, a fast-growing Chinese e-commerce platform, vows to invest up to 10 billion yuan in future profit to expand agriculture and the rural economy.
“Investing in agriculture pays off for everyone because agriculture is the nexus of food security and quality, public health and environmental sustainability,” Chairman and CEO Chen Lei said in a call last week after reporting earnings.
He acknowledged the initiative is not for profit and would affect Pinduoduo’s earnings in the short term, though analysts at Nomura said initiatives such as training farmers to sell products through more channels and improving logistics infrastructure could boost the company’s business.
While Pinduoduo “stressed the social good nature of this initiative, we believe agriculture e-commerce has significant potential, given its high consumption frequency,” the analysts said in a note Tuesday. “In the long run, it may help Pinduoduo acquire a unique strength in one of the largest e-commerce verticals.”
Alibaba will continue to carry out its commitment “to be a good company that creates long-term value for the society in China and globally,” Daniel Zhang, the chairman and CEO, said on Aug. 3. The group will invest all incremental profit and additional capital this year into strategic areas including support programs for merchants to lower their operating costs, he said.
Jeffrey Towson, an online lecturer on China’s digital sector and former professor at Peking University, said such commitments will erode market value and take away funds that otherwise would have been invested for growth.
“Every shareholder is watching to see if this is a one-time event or a regular occurrence,” he said.
Meanwhile, Zhang Yiming of TikTok parent ByteDance and Pinduoduo founder Colin Huang have vowed to donate much of their personal wealth. Five of China’s tech billionaires have pledged at least $13 billion of their personal or corporate fortunes to charitable foundations and initiatives, a sum that far exceeds previous years’ totals, according to Fortune magazine.
Xi restated the socialist value of common prosperity — heavily used by former leader Deng Xiaoping in the 1980s — at a meeting of the Communist Party’s Central Committee for Financial and Economic Affairs last week. He called for “reasonable adjustments to the excessively high incomes” and encouraged wealthy people and companies to give back more to society.
Though China declared this year that it has eradicated poverty, income inequality has not narrowed since 2015. The richest 20% of Chinese had average disposable income of more than 80,000 yuan last year, 10.2 times what the poorest 20% earn, government data shows.