Common prosperity: What it is and how it works

BEIJING • President Xi Jinping has called for China to achieve "common prosperity", seeking to narrow a yawning wealth gap that threatens the country's economic ascent and the legitimacy of Communist Party rule.

Mr Xi, poised to begin a third term next year, is turning to tackle inequality after concluding a campaign to eliminate absolute poverty, pledging to make "solid progress" towards common prosperity by 2035 and "basically achieve" the goal by 2050.

WHAT IS 'COMMON PROSPERITY'?

"Common prosperity" was first mentioned in the 1950s by Mao Zedong, founding leader of what was then an impoverished country, and repeated in the 1980s by Deng Xiaoping, who modernised an economy devastated by the Cultural Revolution.

Deng said that allowing some people and regions to get rich first would speed up economic growth and help achieve the ultimate goal of common prosperity.

HOW WILL IT BE ACHIEVED?

Chinese leaders have pledged to use taxation and other income redistribution levers to expand the proportion of middle-income citizens, boost incomes of the poor, "rationally adjust excessive incomes", and ban illegal incomes.

Beijing has explicitly encouraged high-income companies and individuals to contribute more to society via the so-called "third distribution", which refers to charity and donations.

Several tech industry heavyweights have announced major charitable donations and support for disaster relief efforts. Online gaming giant Tencent Holdings has said it will spend 100 billion yuan (S$21 billion) on common prosperity.

A property tax has been discussed for years and two pilots have been implemented in Shanghai and Chongqing since 2011, but little progress has been made.

WHAT WILL BE THE ECONOMIC IMPACT?

Chinese leaders are likely to tread cautiously so as not to derail a private sector that has been a vital engine of growth and jobs, analysts said.

The common prosperity goal may speed China's economic rebalancing towards consumption-driven growth to reduce reliance on exports and investment, but policies could prove damaging to growth driven by the private sector, analysts say.

Increasing incomes and improved public services, especially in rural areas, would be positive for consumption, and a better social safety net would lower precautionary savings.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 15, 2021, with the headline 'Common prosperity: What it is and how it works'. Subscribe