China’s ‘common prosperity’ drive hits a snag as local officials wonder how to put policy in place

“Common prosperity” may be on the lips of officials across China, but many local authorities are struggling to put the plan into action. After Beijing announced last year it had eliminated extreme poverty, it turned its attention to addressing social and economic inequality, with the goal of achieving so-called common prosperity by 2050. But beyond the big pronouncements, implementation – especially at a grass roots level – is being hampered by confusion about how best to help poor citizens. Some experts even warn if the government strategy is not calibrated in the right way, it could exacerbate China’s yawning urban-rural wealth divide. What is China’s common-prosperity strategy? “Local officials often talk about ‘common prosperity’ in meetings and casual conversations,” said Gao Zhendong, an investor focused on developing industrial estates in China’s interior provinces. “They want to pursue measures to fit the local situation, but obviously it is not easy, nor likely achievable in one term.” While some wealthy provinces on China’s coast are racing ahead with innovative and ambitious plans to boost incomes, many rural provinces are relying on a hodgepodge of existing policies still aimed at meeting basic development needs, according to businesspeople, analysts and officials. One of China’s richest provinces, Zhejiang, outlined a strategy to narrow its wealth gap by 2025, which is being touted as an example for the rest of the country. It is aiming to boost the proportion of households with an annual disposable income of between 100,000 (US$15,821) and 500,000 yuan to 80 per cent, while 45 per cent of its households should have an income of 200,000 to 600,000 yuan by 2025. It marks a huge leap from current income levels. The average household in Zhejiang is 2.35 persons, with an annual per capita disposable income of 57,541 yuan, according to official data from 2021. Kent Cai, a businessman in Zhejiang, said the targets were too high and might be difficult to achieve if authorities take into account the estimated 30 million migrant workers in the province. “It lacks proper assessment of migrant workers’ wealth and welfare growth,” Cai said. China’s national per capita disposable income was 35,128 yuan at the end of last year, with a clear difference between city residents, who earned on average 47,412 yuan per year, and rural residents who earned 18,931 yuan per year. The divergence between urban and rural areas underlines one of the key challenges in implementing “common prosperity”. China’s development needs vary significantly from province to province, meaning a one-size-fits-all approach to reducing wealth inequality does not work. George Magnus, a research associate at Oxford University’s China Centre, said many cash-strapped and indebted local governments could struggle to meet the “common prosperity” goal, especially because many could not tap companies or individuals to redistribute their wealth. “Indeed, I don’t see how they can be the agents of delivery for improved and deeper welfare payments and of hukou-related migrant benefit eligibility without a big reform of the structure of central and local government functions under law,” Magnus said. “The Zhejiang pilot project may or may not be delivering evidence … of how the material and spiritual prosperity strands of common prosperity are being applied – but it’s not really representative of China.” It’s a headache for our local government to develop good industries, even with subsidies Xiao Jinmao In less developed areas, officials say “common prosperity” policies still revolve around rural revitalisation, job creation and a further push for urbanisation. “Our local economy is mainly agricultural-oriented … but few industries,” said Xiao Jinmao, a village official in Jiangxi province in central China. “Strengthening the collective economy of the villages is the key to the central government’s policy, but it’s a headache for our local government to develop good industries, even with subsidies.” Some local governments must balance wildly different development levels within their regions, such as Guangdong, China’s most populous and wealthy province. Although the southern manufacturing powerhouse has transformed from an agricultural backwater to the nation’s leader in technological innovation, it still has a sizeable rural population in the north, east and west whose income levels are far below well-off residents in the Pearl River Delta, which encompasses wealthy cities like Shenzhen and Guangzhou. China’s middle class frets about the future under Xi’s ‘common prosperity’ Despite year’s of investment, successive provincial governments have failed to close the income gap. The Pearl River Delta is home to 30 per cent of the province’s population, but accounted for 80.80 per cent of economic output in 2020, up from 79.13 in 2015, according to the Guangdong statistics bureau. “Since the regional difference in Guangdong is more prominent than that in Zhejiang, the demand for transfer payments [to tackle inequality] and help from the provincial government and rich Pearl River Delta [areas] is even bigger,” said Peng Peng, executive chairman of the Guangdong Society of Reform, a think tank connected to the provincial government. “At present, Guangdong’s rural revitalisation is mainly about industrial revitalisation, followed by the upgrading of villages’ appearances, sanitary conditions, sewage treatment and e-commerce in the countryside. “Revitalising the countryside should be the main direction of efforts.” China has more than 660 cities, while some 20 city clusters of different sizes are home to 75 per cent of all urban residents and generate about 88 per cent of the country’s total gross domestic product. Areas outside the clusters will very likely decay if “common prosperity” policies are not implemented in the right way, Peng said. “There is only one practical solution: let capital and talent from urban areas develop smaller cities and towns,” he said. Improving infrastructure and cutting back on corruption in rural areas will help boost development levels, according to Gao, the investor. “Moreover, the Chinese government’s increasingly powerful big data system also provides more dimensions and parameters to assess and supervise enterprises and officials,” he said. “Common prosperity” is expected to top the agenda at the Communist Party’s 20th National Congress later this year. And Gao believes it will change the way most businesses operate in China in the future. “All kinds of enterprises, government departments, and institutions will incorporate the concept to assess local development,” he said. Already, business owners like Tom Li, from the eastern province of Jiangsu, said county officials had “encouraged” him to make donations and pay his employees more – two key pillars of wealth redistribution under the policy. “I donated four million yuan last month for a charitable cause to respond to the local government’s call that entrepreneurs should show support for the party’s ‘common prosperity’ initiative,” Li said. “In addition, I’m now paying more in wages to employees and contributing more to their pension and medical packages. These are measures recommended by local officials to help low-income earners.”

China’s ‘common prosperity’ drive hits a snag as local officials wonder how to put policy in place

China’s plan to reduce wealth inequality is being hampered by confusion, especially at the local level, about how best to help the poor The country’s development needs vary significantly from province to province, meaning a one-size-fits-all approach does not work

China’s plan to reduce wealth inequality is being hampered by confusion, especially at the local level, about how best to help the poor

The country’s development needs vary significantly from province to province, meaning a one-size-fits-all approach does not work