How Communist Can China Be With All Those Billionaires?

The country’s leadership might need to do something before the proletariat sees red.

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View of the high-end residential apartment buildings of Tomson Riviera at the bank of the Huangpu River in the Lujiazui Financial District in Pudong, Shanghai, China, 11 March 2009. Tomson Riviera, a luxury waterfront residential estate in Shanghai, is again claiming the record for the most expensive flat on the mainland after a unit on the 28th floor was sold for 160,844 yuan (US$23,561) per square meter. Tomson Group said it sold the 597.41 square metre unit for 96.09 million (US$14 million) yuan on November 3. Tomson Riviera is at Lujiazui next to Citigroup Tower, a prime business complex in Pudong. It comprises two 40-storey and two 44-storey residential towers.

Scheherazade S. Rehman is a professor of international finance/business and international affairs at The George Washington University. You can visit her homepage here and follow her on Twitter @Prof_Rehman

Much has been made of the record China recently broke: it houses more billionaires in its government than any other country in the world. They make up the so-called "Red Aristocracy." So the central question of this blog is: How can you create the world's largest such  collection of billionaires in a communist system?

Communism, you recall, is an economic and political ideological system in which everyone is considered equal. Its ultimate goal is to create a classless and stateless society. A simple explanation of how communism works is as follows: There are no individual property rights and all citizens collectively own the land. The resources derived from the land are centralized. The government then makes sure that the profits from the resources are equally distributed amongst all its citizens, as everyone is considered equal. Thus there is an equal distribution of wealth by the state no matter how hard or little you work because the "means of production" are publicly owned. The primary goal of communism is to prevent the dark negative side effects of capitalism – income inequality.

Ironically, the largest communist country now has a government with more billionaires than any other – it sounds to me like all Chinese are equal but some are more equal than others.

[See a collection of political cartoons on the economy.]

Many of the super-rich Chinese have gained in a system where there is a strong link between politics, business and corruption. It's difficult to tell you exactly how many Chinese billionaires there are because they do not want to be found. Chinese billionaires must have political connections to keep their wealth safe, become politicians themselves or acquire foreign citizenships. For example, it is not very surprising that the Chinese parliament has 83 billionaires (comparatively the U.S. Congress has not a single billionaire).

In essence, the Chinese claim of officially being a communist country is only half true. Politically, China is a one-party system that represents all the people, but economically it is rapidly moving away from Karl Marx's ideal – capitalism is in fact alive and thriving.

Political power and wealth are extremely delicate issues in China and the country's leadership is well aware that if the current income inequality continues to widen, it can be a seriously disruptive catalyst in a country were approximately 800 million (out of 1.35 billion) Chinese live on less than $15 a day. The average per capita income is approximately $6,000 (in nominal terms) and $9,000 in purchasing power parity.

[Read the U.S. News Debate: Should Congress Interfere with China's Currency Policies?]

Recent graft and embezzlement scandals and the viral social media tweets about the children of the super-rich Chinese crashing their Lamborghinis and Maseratis have deeply embarrassed the Chinese leadership. The new government under Xi Jinping has "launched a campaign against extravagance and corruption immediately" upon taking office, according to the Financial Times. President Xi is fully aware that if he cannot contain the widening income gap in a population of 1.35 billion, any displays of economic extravagance by the billionaires is perilious, especially in a system were everyone is supposed to be equal.

It will be interesting to see where Chinese communism goes from here. It might be time to call this metamorphosed ideological system something else.

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