In addition to introducing a property tax, the Xi leadership will step up taxation on capital gains and luxury items to redistribute wealth to a wider population.

Ahead of the mass retirement of Chinese baby boomers set to start in 2022, pension reform is also seen as imperative.

“We need to improve our ability to redistribute income through better tax rules and collection,” said Han Wenxiu, executive deputy director at the Central Financial and Economic Affairs Commission, at a news conference Friday.

Xi, who solidified his bid for a rare third term as the party’s general secretary at its Central Committee plenum, has been increasingly borrowing from the socialist playbook to combat economic disparity.

He used an August meeting by the commission to call for sharing the wealth via tax reform.

Xi also aims to offer tax incentives to encourage charitable donations, like those pledged by Big Tech founders after the August meeting.

China has struggled to reduce inequality as its economy has grown. Its Gini coefficient, a yardstick of income inequality, has held largely steady since 2016.

And although urbanites’ disposable income per capita came to about 2.6 times that of rural residents in 2020 – an improvement from the 2012 gap of around 2.9 times – glaring disparities persist within cities.

The top 20% of households on average had 6.2 times as much disposable income per capita as the bottom 20%. That gap has worsened from five in 2012, when Xi took the helm at the Communist Party.

Xi’s plans also include a pilot property tax for five years in selected areas, with a goal of eventually taking it national. This will apply to residential and non-residential property, as well as land-use rights, but likely exempt a taxpayer’s primary home.

Surging condominium prices have become emblematic of China’s urban inequality. Roughly 60% of household assets in China are in the form of housing.

The new tax is designed to keep property prices in check by discouraging speculative investment and by encouraging listings on the secondhand market.

Still, obstacles remain. Candidate cities for the pilot include Shenzhen, one of the country’s economic hubs. But Beijing likely will not be considered, owing to political pressures from top party officials and their families who hold property in the capital.

A cooling property market could pose a challenge as well. Property developers and financial institutions urged Chinese authorities to delay the pilot by at least a year at a meeting this August in Shenzhen.

New-condo prices fell in September for the first time in almost six and a half years because of stricter government regulations, and industry insiders worry that a new tax could further dampen demand.

Xi’s focus on distribution stems partly from China’s slowing economic growth. The People’s Bank of China projects a potential growth rate of 5.1% in 2025, down from 5.7% this year.

It is natural for mature economies to slow down. But stagnation caused by a shrinking workforce and rapidly ageing society – both side effects of China’s one and two-child policies – would be far from ideal.

An ageing population could also squeeze the pension system. The scheme for corporate workers and self-employed individuals has been running at a deficit since 2014, and the Chinese Academy of Social Sciences projected in 2019 that the fund would run dry in 2035.

Baby boomers will start retiring next year, making reforms to the social welfare system a top priority.

As part of its five-year plan through 2025, the Chinese government said it will raise the retirement age – a move that would both expand the workforce and delay pension payouts.

To lift sagging birthrates, China this year also passed a three-child policy and moved to offer more generous assistance and parental leave. It increased restrictions on tutoring companies to prevent education costs from skyrocketing.

But after years of strict family planning rules, many Chinese families today feel that one child is more than enough. A little over six million children were born to first-time parents in 2019 – roughly half as many as 2012.

Whether the country’s push to lift its birthrate finds any success remains to be seen.