China’s ‘common prosperity’ goal won’t mean Robin Hood-style redistribution
Concern over income inequality has driven leaders to adopt a three-pronged strategy to realise the ‘Chinese dream’, focusing on poverty eradication, reorienting the economy and encouraging philanthropy
Chinese President Xi Jinping’s emphasis on “common prosperity” has been taxing many minds. Some relate it to the recent crackdown on Big Tech and talk of redistributive taxes and philanthropy. Some highlight concepts of safety nets and a clampdown on “illicit incomes”.
Others seem to wonder if they should hide their wealth under the mattress. A clarification in a People’s Daily editorial on September 8 may not have succeeded in calming all nerves.
Xi’s watchword reflects a judgment that, after decades of breakneck growth, it’s time to adjust the country’s trajectory to realise the “Chinese dream” of becoming a “strong, democratic, civilised, harmonious and modern socialist country” by 2049, the 100th anniversary of the founding of the People’s Republic of China.
But why now? And is there a coordinated strategy? In the reform and opening up drive that began in 1978, Chinese leader Deng Xiaoping sounded a clarion call “to let some people get rich first”. Since then, China has never turned back.
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Deng Xiaoping’s role in transforming China
Deng Xiaoping’s role in transforming China
According to Forbes, mainland China has 626 dollar-billionaires, the second-highest number in the world. There are 2 million people with investible assets of over 10 million renminbi (US$1.55 million), accounting for 12 per cent of all household wealth.
In 2020, the wealthiest 1 per cent of people held 30.6 per cent of the country’s wealth, up from 20.9 per cent two decades ago, according to a Credit Suisse report, compared with 32.1 per cent in the United States.
On the other hand, according to Premier Li Keqiang, China has some 600 million people with an average monthly income of 1,000 renminbi. China’s Gini coefficient (a measure of inequality that ranges from 0 to 1) has reached 0.47, compared with 0.41 in the US.
Except for a minority of self-made millionaires, the good life seems to elude a whole generation of university graduates, numbering some 9 million a year. Large companies embrace the “996” work culture , which involves working from 9am to 9pm, six days a week.
Limited promotion opportunities, relentless competition in the private sector dominated by large companies, and ultra-high housing costs in big cities where the better-paid jobs are, all add to youth frustrations, let alone financial hurdles to raising children. Many are debating whether to press on (euphemistically referred to as “curling inward”) or to give up (“lying flat”).
Meanwhile, a generation of pressurised students are trapped in the need to excel in the fiercely competitive gaokao (higher education entrance exam), which determines entry to prestigious universities and chances for a better life.
The dice has been loaded in favour of richer children able to afford expensive private tuition fees. However, a plethora of extracurricular lessons have resulted in the phenomenon of overloaded “chicken babies”. Hence, the recent crackdown on the private tuition sector.
Chinese leaders have said repeatedly that inequality above 0.40 is potentially destabilising. Beijing is now rising to the challenge with a clarion call for “common prosperity” to be achieved through a well- coordinated three-pronged economic redistribution strategy.
The first prong is poverty eradication. After lifting over 800 million people out of extreme poverty, representing 60 per cent of the global total, China now claims to have lifted all its people out of poverty, using the poverty line of US$2.30 a day, slightly above the World Bank’s lowest threshold of US$1.90.
Nearly everyone completes compulsory schooling, matching the average level in high-income countries. There is almost universal access to electricity and over 80 per cent of rural areas have access to safe drinking water, according to a CGTN report. The child mortality rate has plummeted.
The second prong is rejigging the economic model from excessive dependence on exports and capital investment, which tend to favour large enterprises, to a more balanced, greener and “higher quality” model which focuses on services, domestic consumption and the environment.
This shift is reflected by the new “dual circulation” economic strategy, setting greater store on a productivity-driven domestic economy, including grass-roots consumption, supplemented by external trade. It also embraces a state-directed drive towards self-reliance in critical technologies in the face of US-led decoupling.
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What happened at the Chinese Communist Party’s major policy meeting, the fifth plenum?
What happened at the Chinese Communist Party’s major policy meeting, the fifth plenum?
Measures to enhance productivity include a gradual extension of the retirement age, promoting the use of robotics, a digitised economy and expanded urbanisation.
An additional 200,000km of modern railway will be constructed, connecting all towns, however remote, of 200,000 people and above. This includes doubling the world’s most extensive high-speed rail system to 70,000km over the next 15 years to link all cities of over half a million people.
China has about 400 million people living on annual incomes between 100,000 and 500,000 yuan for a family of three. This cohort of middle-class consumers is expected to double by 2035.
The ultimate aim is to create an “olive-shaped” economic profile with fewer richer people at the top and far fewer poor people at the bottom with a very large majority in the middle.
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China looks to boost its middle class as it wraps up Xi Jinping’s anti-poverty drive
China looks to boost its middle class as it wraps up Xi Jinping’s anti-poverty drive
The third prong is to expand philanthropy, not merely to dole out cash but to help more people become economically self-reliant and to spread wealth-creating capacities.
On cue, the tech giant Alibaba Group [which owns the Post], proposes to launch a US$15.5 billion common prosperity fund by 2025, with 10 initiatives including investments in technology, supporting small businesses and fostering development in rural areas.
There was initial alarm in some quarters that “common prosperity” may signal a return to a “communist” economy with Robin Hood-style redistribution. Some fear that the Communist Party cannot change its spots. Such misgivings are misplaced.
The party is not monolithic. It has become nimble and adaptive to the times, evident in U-turns on the one-child policy and the embrace of environmentally friendly initiatives. After all, Beijing wouldn’t want to kill the goose that has laid the golden egg of China’s economic miracle.
Andrew K.P. Leung is an independent China strategist.[email protected]
