A new question is being asked in China and around the world: what is “Common Prosperity” and how will it change China? “Common Prosperity” (共同富裕, Gongtong fuyu), a phrase first used by Mao Zedong decades earlier but rarely heard until Xi Jinping mentioned it in a speech early this year, has quickly become the official Chinese slogan of choice, defining the new era of politically led economic development emerging in China. While it has been described in relatively simple terms by Xi as a policy that ensures China will have a more equal income distribution going forward, it has manifested itself in a tumultuous series of actions including regulatory crackdowns on technology platform companies, the banning of the once-thriving private tutoring business, pressure campaigns against China’s rich entrepreneurs that have led to a number of them stepping down from their companies, and a sweeping effort to force the huge and indebted real estate industry to deleverage, which could shake the economy.
With one of the most unequal societies on earth, there is little debate about the need to for China try to stem surging wealth inequality. China’s policymakers also realize that they must narrow the income gap if they want to succeed in their longtime goal of moving away from an investment-reliant growth model to one much more driven by the spending power of their own people. This issue brief examines the key reasons behind Xi Jinping’s drive towards “common prosperity” as China’s economy downshifts to much slower growth and as the demographic challenges of a quickly aging population put new economic pressures on families in the coming years. Key questions this issue brief addresses are: How determined is Beijing to pursue this momentous shift? How successful might it be? Or alternately, how damaging might it prove to be to the vibrant private economy, China’s growth path, and the many companies and countries around the world that rely on China’s continued economic vitality?
The Asia Security Initiative, housed within the Scowcroft Center for Strategy and Security, fosters a trans-Atlantic-Pacific Community with a dual analytical approach grounded in key traditional and non-traditional security issues in order to develop new strategies and policies for the United States, its allies, and its partners.