Deng prosperity (Wikiwand)The latest buzz phrases in economic policy in PRC under Xi Jinping are “common prosperity” and “dual circulation” (see Postscript). Actually, common prosperity (Gongtong fuyu) is not new at all to communist China, there has had two previous iterations, the expression originating with Chairman Mao as far back as 1953. Then in the late 1970s leader Deng Xiaoping co-opted the term, flipping it to help spearhead an economic reorientation from the ideologically adherent socialism of Mao to an opening towards market capitalism and private enterprise. Deng proposed a different route to common prosperity, one that allowed some peasants to get rich, which would provide the catalyst to drag the others towards the stated objective.
(Source: addicted2success.com)First generation billionaires and millionaires; social cohesion imperilled
Beijing tell us the purpose of the Xi-led common prosperity initiative is to reverse the growing trend of the wealth gap which has dramatically increased since Deng’s day. China’s rapid economic growth made it possible to lift millions of Chinese out of poverty, but has also led to a situation where the top 1% holding 30.6% of the country’s wealth. Estimates put the number of Chinese (USD) billionaires as high as 1.1 million (second to the US) (East Asia Forum 20-Sep-2021)⁼ᵃ⁼. According to Elizabeth Economy, China’s Gini coefficient ranks it in the camp of the world’s most unequal states (quoted in Andrew Collier, ’China’s ‘Common Prosperity Campaign Is Going to Be Tough’, The Diplomat, 18-Sep-2021, www.thediplomat.com). Many middle class Chinese citizens are flaunting thbeir nouvelles richesses with luxury acquisitions, which doesn’t go unnoticed by those lower down the socio-economic strata.
Xi in Mao’s shadow? (Photo: denverpost.com)A pivot to the left?
The Asia Society’s Kevin Rudd described common prosperity as a strategy to re-establish the prominence of the state and the party over the market. Many China-watchers don’t necessarily attribute the new move by the Xi government to the communist party having suddenly rediscovered its 1949 socialist roots. With the situation calling for change, Xi is acting also with an eye to bolstering up his leadership and legitimacy to secure a third term as president next year.
Jack Ma (Source: las2orillas.co)Cracking down on Alibaba and Tencent
Xi and the party looked round for targets, pressure has been exerted on China’s high profile business elite, mega-billionaires such as Jack Ma and Pony Ma. In genuflect-like fashion their respective companies Alibaba and Tencent quickly came forward to pledge billions of dollars to charities (‘Chinese tech giants pledge billions to support President Xi Jinping’s ‘ common prosperity goal’, Dong Xing, ABC News, 07-Sep-2021, www.abc.net.au). Others to find themselves in the cross-hairs of the new reform agenda include private tutoring, online gaming and the entertainment industry. Critics say that leaning on big tech companies and taxing high and ‘unreasonable’ incomes won’t fix China’s structural inequality in income. What is required is a fundamental change in tax structure and state system which addresses the core problem of a lack of tax revenue. China’s share of revenue is 28.% of GDP cf. 40.3% for OECD countries, its personal income taxes loiter at just 1.2% of GDP cf. the OECD’s 8.2%. PRC’s “Achilles Heel” in tax is the paucity of its compliance, the present system results in a low number of personal tax payers in China relative to workforce size (Collier).
(Source: Brunswick Group)No “Robin Hood” scenario at work
The Chinese government has moved quickly to reassure concerned business heavyweights (and international investors) about its motives…senior economic official Han Wenxiu’s pitch: common prosperity was “not about killing the rich to help the poor”, rather, he said, it is geared to “doing a proper job of expanding the pie and dividing the pie” (‘Assessing China’s “common prosperity” campaign’, Ryan Haas, Brookings, 09-Sep-2021, www.brookings.edu).
The outcome of such a transformation as the reforms may bring about, some fear may be a “top down Utopian China” with, as K Rudd suggested earlier, even more power and control devolving to the party (‘Changing China: How Xi’s ‘common prosperity’ may impact the world’, Kaishma Vaswani, BBC News, 07-Oct-2021, www.bbc.com).
Little appetite for property and inheritance taxes
One source of redistributing wealth on a national level is taxation on property and inheritance (and a more progressive income tax). But there appears little enthusiasm to upturn this apple cart as it steps uncomfortably on the toes of communist party elites and their vested interests (Haas).
Image: radiichina.comEndnote: Millennial “have-nots“, in dire need of a share of the common prosperity
The effects of the free market’s dislocation of Chinese society in the early 21st century falls heaviest on the young. Young Chinese face enormous pressures on the highly competitive road to success, starting with the pressure cooker of trying to excel in the gaokao (higher education entrance exam). Even with tertiary qualifications under their belt, so many find themselves chasing the same plum jobs. with nine million-a-year university graduates, with the exception of a fortunate few “a whole generation” miss out on the Chinese good life promised by the capitalist success story (‘China’s ‘common prosperity’ goal won’t mean Robin Hood style redistribution’, Andrew Leung, South China Morning Post, 23–Sep-2021, www.scmp.com). Signs of growing millennial dissatisfaction with the uber-demanding drudgery of the “996”⁼ᵇ⁼ work culture in large Chinese companies manifest themselves—largely via Weibo the Chinese social media network—in the “lying flat” movement (píng tâng) … more twenty-somethings and thirty-somethings opting to drop-out of the competitive rat race, thus earning the state‘s opprobrium (‘The buzzwords reflecting the frustration of China’s young generation’, Fan Wang & Yitsing Wang, BBC, 14-Jun-2021, www.bbc.com). Then there’s the elusive dream of home ownership, wealthy property investors and speculators have pushed the cost of owning a home out of the reach of many millennials…squeezed out of the property market, feeling burn-out from “996”, more young Chinese are forgoing (or at least postponing) starting a family.
(Photo.thestar.com.my)Postscript: A new economic model to narrow the income gap
“Dual circulation” dovetails neatly into the objective of common prosperity. Beijing has signalled its intent to re-gig the economic model, moving away from over-dependence on exports and capital investment favouring large enterprises, and tapping into the potential of its huge domestic market. This could lead to a refocus on services, domestic consumption and the environment, and a reliance on “indigenous innovation to fuel growth” (Leung; ‘What is China’s dual circulation economic strategy and why is it important?’, Frank Tang, South China Morning Post, 19-Nov-2020, www.scmp.com).
𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪 𝄪
⁼ᵃ⁼ conversely some 600 million workers live on the equivalent of US$154 or less a month (East Asia Forum)
⁼ᵇ⁼ 9am to 9pm, 6 days a week