Chinese tech philanthropy in the age of ‘common prosperity’

Fifteen years ago, charitable giving in China was a mere trickle. The 2008 Sichuan earthquake is widely cited as a catalyst in the emergence of domestic philanthropy in China, raising the total amount of philanthropic giving thirtyfold, from $440 million to $16 billion, in a single year. More recently, Chinese charity has become dominated by big tech, as some of China’s most profitable companies are making large philanthropic commitments of their own.

In July, when Zhengzhou was hit with one of its heaviest rainfalls in decades, nearly $300 million in donations poured in to aid relief efforts. Chief among them, Chinese tech giants Alibaba, Tencent, ByteDance, and Meituan pledged a total of $154 million for flood relief efforts. After a flood in Shanxi Province in October that left dozens dead and 120,000 displaced, major Chinese tech companies stepped up again, collectively donating more than $46 million to the northern province.

While all these donations provide much-needed disaster relief, some wonder how big a role China’s new policy direction played in the calculus of these companies. Many netizens on Weibo supported the moves, but said that the companies had “political awareness,” meaning that they were showing a sense of social responsibility to curry favor with Beijing.

Altruism versus risk hedging

It’s little coincidence that this revival in generosity coincides with an ongoing and intense regulatory scrutiny on the country’s tech sector. China’s leaders have been clamping down on companies, entire economic sectors, and even celebrities out of concern that growing disparities are an obstacle to stability and “common prosperity,” the government’s multi-pronged approach aimed at achieving more balanced economic growth, and addressing income inequality.

In a recent speech, Xi Jinping connected high inequality between rural and urban counties in China to the collapse of the middle class, social disintegration, and political polarization, calling it out as a significant threat to social harmony and stability. Instead of relying on growth to trickle down to the poor, Xi has called for “dividing the cake well,” taking considerable effort to equalize basic services such as poverty-alleviation assistance and rural educational investment.

Tech companies face particular pressure to showcase social responsibility. Xi acknowledged that the “new round of technological revolution and industrial transformation is giving a strong impetus to economic development.” However, he also pointed out that its negative effects on employment and income distribution need to be “effectively addressed and resolved.” Rich individuals and companies have been encouraged to “return more to society.”

In light of these announcements, Alibaba committed $15.5 billion over the next several years toward initiatives, including technology innovation, economic development, high-quality job creation, and supporting vulnerable groups as a way to “spread wealth.” Tencent responded by committing to double the money it puts toward social initiatives to match Alibaba, investing in rural revitalization and helping to grow earnings for low-income groups.

Just the beginning

Even while the proliferation of online fundraising by China’s big tech grows, it is increasingly laborious to stay in the government’s good graces. But despite the media attention paid to tech philanthropy, policy pronouncements that simply force tech companies to contribute to charity won’t make much of a dent in income inequality. Most analysts agree that inflicting damage on big businesses and billionaires alone will not remake the country’s wealth distribution.

Improving social welfare in China will require the government to tackle fundamental changes in its tax structure and state system, reforms that Andrew Collier argues are highly unlikely under China’s current political system. He writes, “Beijing policymakers are stuck with ad hoc campaigns against the technology companies, demands that CEOs contribute to charity, and calls for redistribution of income — but no fundamental restructuring of the tax base, fiscal system, or the state firms that grab a big chunk of national capital.”

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