Red flags have been raised about the state of China’s flagging economy. Photo: Courtesy of Xinhua

Rich pickings for President Xi and the Party elite

China shelves Western-style capitalism on the alter of Maoism amid a purge on the wealthy

ByChina Factor Staff

“Poverty is not socialism. To be rich is glorious.”

Paramount Leader Deng Xiaoping’s catchy cry for prosperity unleashed economic reforms as the “Architect of Modern China” more than four decades ago.

Today, it has a hollow ring made of fool’s gold after the great Western-style capitalist experiment was shelved on the alter of Maoism under President Xi Jinping’s nationalistic regime.

The rich business class is no longer in vogue. 

“Xi is clearly not a friend of the capitalist class. Since he started a decade ago … and introduced strict regulatory changes, Chinese equities have underperformed in the last decade,” Sheana Yue, the China economist at Capital Economics, told an online forum as reported by the Financial Review.

As for the super-rich, they are rapidly becoming persona non grata.

Fortunes of war:

  • The number of China’s wealthiest people has shrunk by 11% this year.
  • The total wealth of the 1,305 richest of the rich was US$3.5 trillion. 
  • That was 18% down from 2021, according to the Hurun Rich list.
  • Market volatility in Hong Kong, Shanghai and Shenzhen was blamed for the decline.

What was said: “This year has seen the biggest fall in the Hurun China Rich List of the last 24 years,” Rupert Hoogewerf, the chairman of research company Hurun Report, which compiles the list, pointed out.

China’s borders are still closed to the world.

Delve deeper: But it is not just the uber-rich that are paying the price for Xi’s policy switch to a state-controlled economy and the carve-up of the high-tech sector. It is also the upper echelons of the middle class and small investors. 

Between the lines: China’s borders are still closed to the world as Xi’s “zero-Covid” strategy drags on. Capital outflows are now tightly controlled along with the movement of people. Maoism is back.

Big picture: The clampdown on China’s high-tech sector and Russia’s illegal invasion of Ukraine have only added to a toxic mix. Shrinking production in the manufacturing sector, a property meltdown and a debt crisis illustrate an economy in turmoil.

Red rule: “[Xi] will continue with the Maoist tradition with [Communist] Party control of the economy and emphasis on SOEs [state-owned enterprises],” Willy Lam, a senior fellow at The Jamestown Foundation in Washington, told the Financial Review.

China Factor comment: Under Comrade Xi, being “rich” is not so “glorious” after all. Unless you are part of his inner circle inside the Party elite.