China’s Continued Drive Toward Common Prosperity

British Prime Minister Boris Johnson unveiled recently a new increase on national insurance – a mandatory tax on wages, which will disproportionately impact lower earners. As the U.K. moves to implement such a taxation on ordinary workers, China is, on the contrary, increasingly shaping a policy of common prosperity that argues growing inequality and concentrated wealth in society is actually undermining the country’s development as a whole.

The media reception to these two developments has of course been wholly different, with most Western newspapers striking a negative tone and many misunderstandings about what China’s policy actually is.

Despite already being a high-income and developed country, the U.K. is suffering economically, as it has a small and concentrated elite wealthy class and a majority population who are otherwise impoverished, rendering it with lower GDP in nominal terms than in 2007 before the global financial crisis.

Since 2010, the ruling Conservative Party in the U.K. has implemented a series of “austerity” policies which aggressively reduced government spending and economic investment, including cutting public sector jobs, freezing pay, slashing budgets, rolling back state welfare programs, tripling university tuition fees and imposing tax rises which disproportionately impact low earners. These measures, coupled with rising costs of living, have increasingly reduced the ability of British people to consume. As a result, this has hurt economic growth prospects, which alongside the impact of Brexit, has resulted in relative stagnation and growing inequality. All of this is to be considered without the impact of the pandemic.

The main engine of the economy is the ability for ordinary people to invest in their own lives, and the economic woes of the U.K. serve as an important case study for rectifying the need for broader wealth circulation throughout society in order to enable consumption and long-term growth.

China’s vision of common prosperity is a recognition that a prosperous society and perpetuating growth is not defined purely by a small cohort of wealthy people, but the circulation of wealth throughout society as a whole.

However, it is misleading to consider common prosperity as a solution to only dealing with income gaps.

Apart from personal income, priorities of common prosperity lie in public welfare provided by the government, such as education and health care, as well as equal opportunities for everyone in society to become well-off.

Pursuing common prosperity has actually been a part of the mission of the Communist Party of China (CPC) since its founding, and it has always been striving for such a goal.

Since the launch of the reform and opening-up policy four decades ago, China has transformed itself into the world’s second largest economy. However, such rapid economic growth has also widened the development gap among regions and between rural and urban areas, leading to increased income gaps.

Against this backdrop, China has gradually given greater prominence to its vision of seeking common prosperity since the 18th National Congress of the CPC in 2012.

As China eliminated extreme poverty and achieved its goal of building a moderately prosperous society in all respects last year, it has created favorable conditions for advancing common prosperity.

Last year, at the Fifth Plenary Session of the 19th CPC Central Committee, China laid out the goals of significantly expanding its middle-income group, equalizing basic public services, and significantly reducing the gap between urban and rural development, as well as the gap in living standards by 2035.

Achieving common prosperity in a country with more than 1.4 billion people will not be an easy task. It could be a long-term effort, but it is what China aims to establish in order to create a future where prosperity is shared by everyone, not just a few.