China’s Frantic Scramble for ‘Common Prosperity’: Premise, Promises and Problems

By – Mahima Duggal

2021 has been a year of critical importance to China; in July the Chinese Communist Party (CCP) celebrated its centennial anniversary, as President Xi Jinping announced the completion of a moderately prosperous society. With Xi now rallying the Chinese people to realise the CCP’s second centenary goal—to build a “great modern socialist country”—achieving ‘common prosperity’ (共同富裕, Gongtong fuyu) as part of promoting people’s well-being has emerged as a priority under the CCP’s long-term agenda. On August 17, at the 10th Central Committee for Financial and Economic Affairs (CCFEA) meeting of the CCP, Xi called for China’s elite to promote ‘common prosperity’ in undertaking “high-quality development” and “forestalling major financial risks”. 

Such focus on the ‘common prosperity’ ideal essentially entails narrowing the sharp wealth gap and widening socio-economic inequality that not only threatens the upward economic trajectory of China but also the political legitimacy of the CCP. It has massive implications for the how we may see the Chinese economy moving forward, since it essentially puts equal income distribution and people-centred development across various industrial sectors and geographies at the helm of China’s economic ideology and modernisation plans. With Chinese elites now scrambling to take forward and effectively realise Xi’s undoubtedly ambitious and complicated vision, what does ‘common prosperity’ mean, how is it being promoted, and what are the underlying connotations and implications of the notion? 

From Mao to Xi: ‘Common Prosperity’ in Chinese Socialism

The idea of ‘common prosperity’ is far from a new development in Chinese socialism, but has been a recognised feature of China’s promoted modernisation model since the 1950s. It was first mentioned in party documents during the Mao Zedong era at a time when the Chinese economy was highly unstable. Under Deng Xiaoping, Mao’s ‘common prosperity’ philosophy took a back burner in favour of a new “quasi-capitalist” economic development strategy. This open-door economic policy focused on achieving rapid growth (through strategies like attracting foreign capital, building economic and technological zones, and supporting a domestic entrepreneurial activity spurt). Although it had clear positive outcomes in thrusting China into a new economic bracket (or status), this has also brought about some serious negative repercussions; the extreme gap between the rich and the poor ranks top amongst these. 

Under Mao’s socialist economy, despite low national incomes and sub-par living standards, there was little inequality—which was a phenomenon deemed far more deplorable than poverty under the communist ideals. However, under Deng Xiaoping’s open-door economic policy, disparate growth with high speed, for instance in coastal provinces (under a coastal development strategy) over inland regions, was deemed acceptable, if not preferable. Overtime, even though China has become the world’s second-largest economy by Gross Domestic Product (GDP), continued emphasis on an ‘efficiency first’ economic growth policy, even if unequally distributed, has resulted in a wide wealth gap between the coastal and inland regions and urban and rural societies. For example, as of 2019, average disposable income per capita in Shanghai (69,441 yuan) is almost four times higher than those in the Gansu province (19,139 yuan). Furthermore, 10 percent of the richest own a growing portion of China’s wealth; this gap between the rich and poor in China is larger than the US or European nations like Germany and France, and is more in-line with the characteristics of a capitalist country than a socialist one. More importantly perhaps, this inequality in the living standards and development of cities and rural areas has prompted people to migrate to highly populous urban areas, putting a strain on the agricultural industry in the inlands and posing a threat of food shortages in the long-term. 

Notably, alleviating poverty has been a core objective of the CCP over the past two decades; Xi even declared a “complete victory” in alleviating absolute poverty from the country in February 2021. However, while China has undoubtedly made strides in reducing extreme poverty, more than half of China’s 1.4 billion population still has a bare minimum of 12,000 yuan in annual income. On the other hand, China boasts of more billionaires than any other state barring the US with 81 Chinese persons making Bloomberg’s Billionaires Index and China leading the Hurun Global Rich List 2021 with 1058 billionaires (more than any other state including the US). At the same time, China’s unique mixed system of a socialist regime combined with a market-based economy had bred corruption, tax evasion and smuggling amongst the Chinese elite, including members of the CCP. A 2017 report found that China’s parliament was home to about 100 billionaires—truly giving credence to the modern Chinese saying that “those in authority (quan) will be able to acquire money (qian)”. 

‘Common prosperity’ aims to remove such a trend as it marks something that could cause people to rise up in rebellion, thus threatening the CCP’s political control and legitimacy. Since assuming office as President and CCP General Secretary, rooting out corruption has been a highly-touted agenda of Xi’s administration. Through such an agenda, Xi’s has strengthened not only the CCP’s, but also his own power and authority over the country. Xi’s anti-corruption campaign became a pretext to eliminate political rivals and potential successors—much like Mao’s crusade (although his political purge was perhaps less discerning). Xi’s campaign and methodology is hence eerily reminiscent of the great helmsman Mao, putting his “centennial leap” in mobilising ‘common prosperity’ ideals in direct contrast with Mao’s own “Great Leap Forward” that was rooted in a perverse ideology and proved rather catastrophic. 

Therefore, although several official Chinese media outlets have sought to frame the return to ‘common prosperity’ as Xi’s campaign to innovate China’s communist ideology and the CCP’s governance philosophy, the focus on the ideal is in fact merely a resuscitation of the Maoist notion. It is not a progression to a new era in Chinese politics, but rather “a retrogression to the Mao era” aimed at reflecting the CCP’s pursuit to reinstate an egalitarian communist society. In other words, while it appears an almost utopian ideal, when considered in a larger context of Xi’s policies and ambitions thus far, the push for ‘common prosperity’ requires more attention and critique.

Promises and Problems

Xi first emphasised delivering ‘common prosperity’ in his speech to the 19th National Congress of the CCP at the onset of his second term in 2017; however, the ideal has found renewed attention in Beijing’s public messaging in recent months as Xi prepares for his third term. Recent analysis by Bloomberg found a sharp increase in the number of times President Xi referred to the term ‘common prosperity’ from fewer than 10 in 2019 to about 30 in 2020 and more than 60 in 2021, thus showing the rapid pace of heightened commitment to the ideal. 

Xi’s ‘Common Prosperity’ Pilot Programs

Xi has already introduced several policy guidelines to take forward the ‘common prosperity’ agenda. In the CCP’s Central Comprehensive Deepening Reform Commission, Xi approved strengthening anti-monopoly and fair competition laws to promote high-quality development for ‘common prosperity’. Moreover, to pilot test the ‘common prosperity’ model, Xi designated the Zhejiang province—China’s third-richest province, home to numerous IT firms including Alibaba, and one with which Xi shares historical ties as the region’s party secretary from 2004-2007—a demonstration zone. The policy guidelines to realise the model is laid out in a CCP and State Council document released in July 2021. The guidelines not only aim to increase disposable income per capita to 75,000 yuan by 2025, but also mandate raised salaries and social benefits for middle-income and underprivileged people.

Another pilot model for ‘common prosperity’ is the Xiong’an New District that was established in 2017 featuring policies like “standardised income and social welfare perks such as subsidised housing and generous retirement benefits”. Notably however, even after four years of establishing this pilot zone, the region has seen little growth and investment. Although both high and low-income persons benefit from subsidised housing, apartments remain barren as the total population of town is still a little over a million. Simultaneously, Xi is also cracking down on private tutoring to create a ‘fairer’ education system, although it is far more likely that the lucrative private industry will move underground and only be accessible to the ultra-wealthy.

A Crackdown for ‘Control’ Revolution?

Beyond such official policy measures, Xi has also injected the ‘common prosperity’ ideal into the social and cultural domains—like people’s everyday lifestyles—essentially aimed at curbing any modern, “western” activity. In fact, many analysts have likened Xi’s actions to Mao’s Great Proletarian Cultural Revolution that decapacitated the entire Chinese economy. Beijing’s recent policies include restricting children under 18 to only one hour of playing video games to limit addiction. Regulators have mandated restrictions be applied to all devices to protect the physical and mental health of the younger generation from “spiritual opium” that are video games, in the “era of national rejuvenation”. Not only has this curfew adversely impacted the gaming industry, but also opened doors for grossly invasive measures—like Tencent’s facial recognition system that identifies children using adult IDs to evade the ban.

Furthermore, in an extension of ‘common prosperity’, as part of bringing to fruition Xi’s vision of tighter party control for a healthier Chinese society, Beijing has banned broadcasters from televising any “sissy men [effeminate men] and other abnormal aesthetics” and “vulgar internet celebrities”. Instead, Beijing wants to correct the prevailing beauty standards by encouraging Chinese traditions and a socialist revolution culture. Following Beijing’s dictate, Chinese social media platform Weibo banned 145 internet celebrity accounts for a range of reasons (including national sovereignty and territorial integrity) in August, and suspended another 22 k-pop fan accounts for “star-chasing behaviour”. Although Chinese analysts have framed Beijing’s “rectification actions” as a “profound revolution”, they are in fact a blatant “control revolution” with propaganda tools, intimidation tactics and Xi’s ambition to assert greater individual dominance. The growing coercion to study the Xi Jinping Thought on Diplomacy, including at the highest levels of education, is a perfect example of such control. 

A Frenzy of Elite-driven Philanthropy

Simultaneously, Beijing has also clearly urged highly lucrative private firms and high-income individuals to further ‘common prosperity’ by engaging in more philanthropy. In almost a mad rush to stay in the CCP’s good books—and perhaps discourage upcoming actions like nationwide residential property tax—seven Chinese billionaires donated USD 5 billion thus far in 2021 (more than total national charity in 2020). Meituan founder Wang Xing, for instance, pledged USD 2.27 billion in shares after his firm was subject to state scrutiny. In the private sector, Tencent (USD 15 billion), Pinduoduo (USD 15 billion), Alibaba (USD 15.5 billion), and Xiaomi (USD 2.2 billion) have furnished some lavish contributions in a bid to avoid regulatory investigations.

This frenzied top-down philanthropy only goes to show the panic prevalent in China’s business elites. Notably, Alibaba founder (and China’s fourth richest man) disappeared for three months immediately after a controversial speech to high-profile figures in which he criticised the Chinese banking establishment, angering Xi and prompting an anti-monopoly investigation into the company. While firms have little choice but to cooperate to the CCP’s dictate and support ‘common prosperity’ to avoid becoming targets, reform is more difficult when it comes to areas like residential property taxes wherein party members have more to lose. 

Is China Entering a New Political Era?

‘Common prosperity’ is therefore not isolated to the economic domain, but stretching into a ‘purification’ of the Chinese society, and by extension, a vice-like political control held by President Xi and the CCP. It is not therefore surprising that the emphasis on ‘common prosperity’ comes just as Xi is about to embark on his third term in office. The COVID-19 pandemic and the following (albeit brief in China’s case) economic crisis raised the risk of social unrest in China, with early 2020 reports  in global media noting protests in Wuhan and unprecedented levels of discontentment online that forced government censors to work overtime. In this context, Xi has used the CCP’s centennial to launch a new (and rather Edenic) campaign for ‘common prosperity’ to distract citizens and prevent domestic unrest. In other words, Xi has used the philosophy to suppress popular rebellion and exploit people’s frustrations to eliminate his political rivals.

Simultaneously, the drive for ‘common prosperity’ is also very much driven by an international impetus; Beijing no doubt hopes that the move will be viewed by its international audience as a ‘good’ and detract from its dismal human rights record, which has been subject to intense foreign censure over the situations in Xinjiang and Tibet. Although domestic, ‘common prosperity’ is partly a way for Beijing to establish itself as a more credible global leader—after its disastrous ‘wolf warrior’ diplomacy efforts—that has the will and capacity to be a pivotal player in global development, prosperity, justice and common security.

In essence, inequality has becoming somewhat of an Achilles’ heel of the Chinese governance system, and tackling it comes as a necessity to maintain the public’s trust in the government—something Confucius believed was even more important than securing material growth and prosperity. However, in practice, the concerted push for the new ‘common prosperity’ model puts social values front and centre and could have dangerous social/cultural repercussions. Economically too, the cost and conditions for doing business in China are bound to increase under the new ‘common prosperity’ era and, as was the case with the Xiong’an New District, this will inevitably put off foreign (and perhaps even domestic) investors. Beijing must ensure that the push for ‘common prosperity’ does not adversely impact a booming economy and follow Mao’s disastrous example by regressing to “common poverty”. ‘Common prosperity’ implies significant CCP intervention in all walks of the Chinese state, from economic to political to cultural—a worrying phenomenon for the international community.

Ms. Mahima Duggal is a Research Associate at the Centre for Air Power Studies (CAPS) in New Delhi. She is also an Associated Research Fellow at the Stockholm Centre for South Asian and Indo-Pacific Affairs (SCSA-IPA) of the Institute for Security & Development Policy (ISDP), Stockholm, and Editorial Assistant to the Series Editor for Routledge Studies on Think Asia. Ms. Duggal holds a MA (distinction) in International Security from the Department of Politics and International Studies (PAIS), University of Warwick, UK.

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