Understanding the Idea of Common Prosperity

At the main entrance of Zhongnanhai in downtown Beijing where the Central Committee of the Communist Party of China (CPC) and the offices of the State Council, China’s cabinet, are located, stands a traditional screen wall inscribed with a slogan in Chinese, meaning “serve the people.” This concept is the base to understand how China is governed in contemporary times, the period in which it has reached its greatest dynamism, resilience and size in its entire history. It is also the starting point to understand “common prosperity,” currently a hot topic across China and abroad.

Burgeoning inequality is a problem shared in most of the world, but the way to tackle the problem differs. The meaning and scope of China’s efforts have been misunderstood by some.

The Chinese government has policies and measures in the pipeline to improve the wealth distribution system and narrow the income gap between different regions and groups. The measures for common prosperity are comprehensive and consistent with previous policies and five-year plans and with the traditions and practices of the CPC. It follows the dictum, attributed to Deng Xiaoping, the architect of China’s reform and opening-up drive, of crossing the river “by feeling the stones.”

Literally meaning to cross the river carefully by feeling the stones underfoot, the saying emerged as a concept when Deng launched the economic reform in the late 1970s, when it meant to start trial experiments to understand the impact of a reform, and then to replicate it wider if it proved successful. In 1992, the 14th National Congress of the CPC decided to build a socialist market economy. Then the country saw its economy gain booming development during the following years and secured it the world’s second largest economy position in 2010. While celebrating the CPC’s centennial on July 1, 2021, President Xi Jinping declared the country’s completion of building a moderately prosperous society in all respects. As China has built adequate economic might, common prosperity becomes one of the top priorities for the country’s leadership. Common prosperity is part of a process, not a decision made out of the blue, and has long been embedded in the national policies and development plans since the commencement of the reform and opening-up drive. It’s clearly stated in the third volume of Xi Jinping: The Governance of China, which includes Xi’s most recent speeches between 2017 and 2020.

In “A Better Life for All Our People,” a speech in the book, Xi stresses that a key aspect of modernization is “improving the quality and efficiency of development to better meet the growing expectation of our people in all areas, and further promote well-rounded personal development and common prosperity for all.” In other words, the community and the individual are part of the balance.

There is universal consensus that the economic reform has brought China undeniable benefits, ameliorating living standards over the last four decades in an unprecedented way. It is actually a milestone in the history of human development. From 2012 to 2020, China lifted 98.99 million rural people out of poverty. Yet despite the growing prosperity, the country has experienced periods of widening income inequality.

According to Cai Fang, former vice president and professor at the Chinese Academy of Social Sciences, the Gini coefficient, which denotes income inequality, was 0.398 in 1997, and reached a peak of 0.491 in 2008. A Gini coefficient of zero expresses perfect equality. In 2019, before the COVID-19 pandemic, it declined only marginally to 0.465. Thus, it is time to adjust the social balance.

Since the late 1970s, China has adopted a wealth distribution system based on labor, while allowing various distribution channels. Taxation and social security are part of the “second distribution” system, aimed at distributing national wealth in a fairer way. But it is not enough and now it is time for the “third distribution” system, which is about creating chances for high-income groups and enterprises so they can give back to society, including voluntary gifts and charitable donations. Follow-up policies, particularly the ones related to taxes, will be of critical relevance.

When we talk about engagement and action, we need to remember that Xi’s personal commitment is based on his own life, an aspect that is often neglected by the Western mass media covering China. In 1969, when Xi was only 15, he was sent to the countryside in Shaanxi Province in northwest China to work there with the farmers. He spent several years living in the small village of Liangjiahe on the Loess Plateau, leading countless development initiatives. At the end of the day’s labor, he would return to the primitive cave house where he was staying and slept the hard kang, the primitive mud bed where the impoverished villagers slept.

Xi joined the CPC in 1974 and became Party secretary of Liangjiahe. Later in life, his political career took him to the provinces of Fujian and Zhejiang, and then Shanghai Municipality, where he played a key role in advancing development and high-tech initiatives.

Xi’s people-centered philosophy explains the government’s efforts to save people’s lives at any cost during the COVID-19 pandemic, unlike several other leaders of major countries around the world. It is worth noting here that the World Health Organization recently said Europe is again becoming the center of COVID-19 with a new wave of infections in winter, warning that it may kill 500,000 by February if measures are not taken.

On the other hand, China’s zero-tolerance COVID-19 policy is well known, a policy fully embodying the CPC’s people-centered governing concept. The pandemic has particularly affected the world’s most disadvantaged and accelerated inequalities. Interestingly, North America and the European Union, two of the world’s wealthiest regions, have seen their Gini coefficient growing during the COVID-19 pandemic. The gap is strikingly stark in the United States, where the poorest individuals have seen no real income growth since the 1980s.

The cover of the November 6th issue of The Economist depicts U.S. President Joe Biden, who recently criticized other societies as dramatically sinking into a hole. The magazine says he has seen his approval ratings collapse and at this point in a first term, only his predecessor Donald Trump was more unpopular. In European and Latin American parliaments the majority parties and weak or strong oppositions prone to infighting are undermining initiatives and capacities to fight inequality in their respective societies. Governance is more challenging than ever.

As a first-hand observer of China’s gigantic modernization process spanning over four decades, I have friends in major cities and the countryside of China whose living standards have improved dramatically since the 80s. In March 2017, I had the chance to visit impoverished villages in Hebei Province adjoining Beijing, where I talked to several farmers as well as local authorities. They were knowledgeable, confident and hardworking.

The focus on balanced improvement of the living standards of more than 1.4 billion people is real. But some international analysts have seen the common prosperity concept and the third distribution as another way to compete with the West, which is not true. It is pure development in progress.

Augusto Soto is director of Dialogue with China Project and representative in Spain of China Today.