|Alibaba Pledges $15.5 Billion as Chinese Companies Extol Beijing’s ‘Common Prosperity’ Push|
Tencent and others also rush to support government initiative to bolster social equality in China
By Frances Yoon
Wall Street Journal
Updated Sept. 2, 2021 9:51 am ET
Alibaba is the latest big company in China to express support for the common prosperity campaign driven by President Xi Jinping. PHOTO: TINGSHU WANG/REUTERS
Alibaba Group Holding Ltd. vowed to spend the equivalent of $15.5 billion fostering social equality, becoming the latest in a series of big Chinese companies to take up Beijing’s drive for what it calls “common prosperity.”
Businesses and individual entrepreneurs are in some cases pledging billions of dollars to good causes, and companies have quickly adopted the newly popular slogan, as they seek to stay on the right side of President Xi Jinping’s government amid a series of corporate crackdowns.
Alibaba said Thursday it would spend 100 billion yuan, the equivalent of $15.48 billion, by 2025 in support of Beijing’s common prosperity campaign, confirming a report in the Zhejiang News, an outlet run by the provincial branch of the Communist Party.
The report listed a series of uses for the money, including funding for technological innovation, supporting economic growth and agricultural modernization in less developed regions, and bridging the digital divide between urban and rural areas. Alibaba will also support young entrepreneurs and gig-economy workers, and help disadvantaged sectors of society, the Zhejiang News said.
President Xi Jinping has used the common prosperity initiative to reflect China’s heightened focus on social equality and economic development. PHOTO: SHEN HONG/XINHUA/ZUMA PRESS
A fifth of the money would help develop Alibaba’s home province of Zhejiang, the local news media outlet said. The ruling Communist Party’s top leadership designated the eastern province as a showcase locality for common prosperity in May.
Alibaba’s pledge is substantial, even for a company of its heft. The e-commerce giant had a market value of about $461 billion as of Wednesday, according to FactSet. Analysts polled by the data provider expect it to generate about $143 billion in revenue in the financial year ending March 2022.
Common prosperity isn’t a new term, but has taken on greater significance recently. It was used by Mr. Xi at a major meeting on financial and economic affairs last month, reflecting his government’s heightened focus on social equality.
That focus helps explain recent clampdowns on powerful technology companies such as Alibaba and Tencent Holdings Ltd., the gaming and social-media giant, as well as on other businesses seen as contributing to social divides.
A day after Mr. Xi’s comments, Tencent said it would spend the equivalent of $7.7 billion promoting common prosperity this year, by investing in matters such as medical care, education and revitalizing rural areas. It had pledged an investment of equivalent size in April. Tencent was valued at $596 billion as of Wednesday’s market close, according to FactSet.
Businesses in a range of sectors also have jumped on the bandwagon. Companies that have mentioned common prosperity in recent earnings reports include state-owned banking giant Industrial & Commercial Bank of China Ltd., property developer Logan Group Co., and Ping An Insurance (Group) Co. of China.
“It makes sense for every company in China to align themselves” with the common prosperity push, said Elizabeth Kwik, Asian equities investment manager for Aberdeen Standard Investments.
She added, “But it doesn’t mean the government is placing society over earnings or shareholders—they just want companies to play a part and help achieve fair distribution of income.”
China’s newer tech companies are also getting with the program.
Without using the term common prosperity, on Aug. 24 Pinduoduo Inc., a fast-growing rival to Alibaba, said it would earmark the equivalent of $1.55 billion in profit from the second and subsequent quarters to help farmers and rural areas, with an initiative focused on agricultural technology.
Businesses in a range of sectors in China are getting behind the cause of sharing wealth and pledging investment in underdeveloped areas. PHOTO: QILAI SHEN/BLOOMBERG NEWS
Food-delivery giant Meituan has also stressed its adherence to the cause. “We will never stop creating greater value for all the participants in our ecosystem and promoting ‘common prosperity’ for the larger society,” the company said in financial results published Aug. 30.
Meituan Chairman Wang Xing, who has personally donated shares worth billions of dollars to a charitable foundation, said his group would live up to higher expectations from government and society, help create more jobs and work to achieve carbon neutrality.
In time, the drive to share wealth more widely could lift the cost of doing business over and above any one-off donations, analysts and economists say.
For example, companies are likely to lift wages, which will lower their profits, said Carlos Casanova, a senior economist for Asia at Union Bancaire Privée. By next year, Mr. Casanova said he expects more clarity on how the government will pursue common prosperity, making it easier to understand which sectors will benefit from or be hurt by the reform.
Companies could be asked to contribute in the form of paying higher taxes or making greater charitable donations, said Ben Luk, senior multi-asset strategist at State Street Global Markets.
Some executives say their core business is already contributing to the wider good. Entrepreneur Guo Guangchang, the co-chairman of conglomerate Fosun International Ltd., told investors recently that common prosperity was “our core value.”
Growing Fosun’s business would aid common prosperity by benefiting staff, customers, investors and partners, he said, while its Fosun Foundation was involved in social and charity initiatives.
—Raffaele Huang contributed to this article.
Write to Frances Yoon at firstname.lastname@example.org
Alibaba Pledges $15.5 Billion as Chinese Companies Extol Beijing’s ‘Common Prosperity’ Push - WSJ