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Macroscope
OpinionComment
Aidan Yao
Aidan Yao

Macroscope | As China moves towards ‘common prosperity’, it must not take its eye off growth

  • If the shift in strategy is to succeed, Beijing must adjust tax policies, improve the social safety net, and ensure equal opportunities by reining in corporate excess
  • Achieving fast yet equitable growth demands a delicate balance between growth-oriented strategies and redistributive policies

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Commuters wait at a traffic intersection in Beijing on August 25. China has vowed to promote the welfare of all people and redistribute income, underscoring its push to achieve “common prosperity” in the country. Photo: Bloomberg
Aidan Yao
As China embarks on a transition from a growth-first development model to one of balanced growth and equality, it is trying to ensure that wealth redistribution does not undermine the importance of wealth creation.
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As a developing country, with per capita income less than one-fifth of the United States’, China cannot afford to abandon its growth objective and become a full welfare state. Finding an optimal balance between “dual circulation”, which aims to grow the pie, and “common prosperity”, which focuses on cutting the pie, is critical for China’s development.
In my last piece, I analysed how, beneath the seemingly uncoordinated regulatory crackdowns on multiple, unrelated sectors, a profound shift seems to be occurring in China’s long-term development strategy – from “allowing some people to get rich first”, an approach initiated by Deng Xiaoping, to “common prosperity for all” under President Xi Jinping.

While both strategies aim to remould China’s income and wealth distribution to create an olive-shaped society – from a pyramid shape – the first strategy does so by lifting people out of the bottom of the income pyramid, while “common prosperity” is designed to redistribute wealth from the top.

A public screen in Shanghai displays China’s GDP figures on August 18. China’s per capita income is less than a fifth of that in the US. Photo: Bloomberg
A public screen in Shanghai displays China’s GDP figures on August 18. China’s per capita income is less than a fifth of that in the US. Photo: Bloomberg

To achieve this ambitious objective, Beijing will probably need to focus on policy adjustments in three broad, but critical, areas.

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