On 17th August 2021, Chinese President Xi Jinping publicly supported the state-backed economic redistribution policy, the “Common Prosperity,” that focuses on achieving moderate wealth for all rather than just a few. While speaking at a finance and economy meeting at a resort in Beidaihe, President Xi Jinping emphasized the need to support moderate wealth for all through government policy and other measures.
The meeting called for a reasonable adjustment of exorbitant incomes and efforts to incentivize the high-income businesses and groups to return more to society.
What Does Common Prosperity Mean?
The phrase “common prosperity” is understood to mean modest wealth for all rather than just a few individuals. However, although it is a frequently used slogan, its legal translation has always mainly remained vague, with a risk of becoming another popular cliché. Leaders who spoke at the meeting used the term “common prosperity” to mean a tool for equal economic distribution rather than a phrase that means prosperity for just any group.
How Will the Government Archive Common Prosperity?
Some of the state’s measures under this program include putting curbs on “excessive” incomes and encouraging the wealthy to give back more to society. There are also suggestions to raise the taxes on high-income groups and capital returns. Additionally, the government could be considering privatization measures of some of the critical public services to ensure fair distribution of services across all cadres of the population.
What Are the Likely Impacts of the Government’s Common Prosperity Policies?
Although “common prosperity” policies aim to address the glaring inequalities between the high-income earners and lower-income earning groups, experts are warning against any rush policy implementation to prevent counterproductive consequences.
The principal economist at The Economist Intelligence Unit, Yue Su, advises that any policy implementation towards such an economic redistribution program needs a more pragmatic approach. According to Su, some of the unintended consequences of a rush and ill-thought-out redistribution policy implementation on the economy includes:
- Capital outflows: Raising taxes on high-income groups and capital returns will not only likely curb investment but can also lead to capital outflows.
- Poor quality public services: She added that privatizing critical public services such as education, medical care, and health care for the elderly will likely slow down access to the services.
Is There a Basis for Change in the Government’s Economic Policy?
Recent statistics point to a widening income inequality gap among China’s 1.4 billion people. The following estimates published by the Paris School of Economics professor Thomas Piketty together with his team reveals glaring income inequalities:
Disparities between sections of the population: The top 10 % of the earners in China earned 41 % of national income in 2015, up from 27 % in 1978. However, the lower-earning half of the population saw its share of income drop substantially to nearly 15% in 2015 from about 27% in 1978.
Disparities between regions: Currently, the residents living in coastal areas such as Shanghai City have an average per capita disposable income of 7,058 yuan ($1,091) a month. This is nearly double the 4,021 yuan that other residents in countryside cities are earning. It is also far higher than the 1,541 yuan for the rural residents.
The Chinese government now hopes to use such programs as the “common prosperity” to address such inequalities and fulfill some of the longer team pledges of the ruling Chinese Communist Party.
About David Milberg
David Milberg is an experienced financial analyst and entrepreneur from New York City. Milberg is a proud father of three kids. Milberg graduated from Princeton University with a BA in History and graduated from Columbia University with an MBA. David Milberg currently serves as a Senior Vice President at Milberg Factors, Inc.
Over his tenure at Milberg Factors, David has also been involved in numerous not-for-profit activities. In light of David’s charitable work, he was honored in the year 2000 by the accountants and bankers division of Big Brothers Big Sisters of New York and by the Metropolitan Jewish Geriatric Foundation. David Milberg has also been active in the Lincoln Center Business Council.
David Milberg has invested in such major broadway productions as Mel Brook’s The Producers, The Weir, and the hit revival of Pippin directed by Diane Paulus and starring Tony Award Winner Patina Miller at the Leading Player. David sits on the Board of Trustees for The Prospect Theater Company and is a fervent supporter of the Lincoln Center Theater. David Milberg presently serves on the Board of Trustees of the Princeton Triangle Club, where he was Vice-Chairman.
David Milberg has a rich, varied background in musical theater and live stage performance.