Alibaba To Invest $15.5B In Chinese Government-Driven 'Common Prosperity' Initiative

Alibaba Group Holding Limited BABA, which is facing intense regulatory scrutiny in its home country, has committed a whopping sum to a Chinese government initiative to share wealth.

What Happened: Alibaba has agreed to contribute 100 billion yuan ($15.5 billion) over five years to Chinese President Xi Jinping's "common prosperity" vision, according to reports citing state-backed Zhejiang Daily. The news was reportedly confirmed by Alibaba.

Alibaba's funds will be channeled toward subsidies for small- and medium-size enterprises and improving insurance protection for gig economy workers such as couriers and ride-hailing drivers.

Alibaba will also reportedly set up a 20-billion-yuan "common prosperity development fund."

Related Link: 3 Alibaba Analysts Say Valuation Is Attractive Despite Q1 Disappointment

Why It's Important: The Chinese government is striving to siphon off funds from big and mighty corporations to social causes in a bid to remove the inequality prevailing in the country.

The rich-poor divide is deeper in China than in most advanced economies, with the poorest 20% of the households earning merely 6.5% of the total income, according to OECD estimates.

Other big Chinese corporations such as Tencent Holdings Limited TCEHY and Geely Automobile Holdings Limited GELYF have already pledged contributions to the "common prosperity" initiative.

Alibaba's benevolence comes against the backdrop of regulatory scrutiny of big Chinese companies operating across sectors such as tech, e-commerce, fintech and private education.

Alibaba was forced to cough up $2.75 billion in fines for abusing its dominant market position. The Ant Financial fintech arm was also forced to shelve its massive IPO plan and was asked to organize as bank holding company.

At last check, Alibaba shares were up 0.61% at $174.31.