The excerpts of Xi Jinping’s remarks demonstrate that the CPC desires to achieve the goals of ‘common prosperity’ by building basic institutional arrangements for the coordination of primary distribution, redistribution, and the third distribution.
On 17 August 2021, General Secretary of the Central Committee of the Communist Party of China (CPC), Xi Jinping, who is also head of the Central Committee for Financial and Economic Affairs, chaired the proceedings of the tenth meeting of the Committee. The Committee deliberated on the issues related to the promotion of “common prosperity” (共同富裕) and prevention and mitigation of major financial risks (金融风险). Xi’s remarks that appeared on the Chinese editions of People’s Daily and Xinhua emphasized that “Common prosperity is the essential requirement of socialism and an important feature of Chinese style modernization. It is necessary to adhere to the concept of people-centered development and promote common prosperity in the pursuit of high-quality development.” He further said that “It is necessary to strengthen the regulation and adjustment of high incomes, protect legal incomes in accordance with the law, reasonably regulate excessive high incomes (合理调节过高收入), and encourage high-income groups and enterprises to return more to the society (更多回报社会).” Below the headlines, it reported Li Keqiang, Wang Yang, Wang Huning, Han Zheng also attended the meeting. Why is Xi Jinping advocating “common prosperity” and what are the ways he wishes to achieve it? Why has Wang Yang’s name jumped on the seniority list?
The excerpts of Xi Jinping’s remarks demonstrate that the CPC desires to achieve the goals of “common prosperity” by way of building basic institutional arrangements for the coordination of primary distribution (初次分配), redistribution (再分配), and the third distribution (第三次分配).The concept was proposed in the 1990s by Li Yining, an economist and honorary dean of Guanghua School of Management, Peking University. Li proposed that the primary distribution is based on efficiency function of the factors in production; redistribution refers to the use of taxation and fiscal expenditure by the government to redistribute wealth between different income entities through social security, public services and subsidies; and the third distribution is all about philanthropy by the wealthiest through charitable public welfare methods. Li has also been advocating that markets should play a greater role in educational resource allocation.
The “Three distributions” have gained traction at least since 2019, for there is a general belief in China that allowing a few people to get rich first, has created huge social inequalities in the last four decades of reforms. According to the 2020 Credit Suisse report, richest 1% of Chinese now hold 31% of the country’s wealth, up from 21% in the year 2000. The same report says that 11% of the world millionaires are produced by China. Immediately after Xi’s remarks, Tencent announced that it will invest US$7.7 billion in China’s common prosperity special project. Early in April, Tencent committed the same amount towards “sustainable social value innovation strategy”. According to a report published by Bloomberg, “seven Chinese billionaires have directed a record $5 billion to charity so far this year”. These include Chen Dongsheng of Taikang Life Insurance Co. ($154.3M), Lei Jun of Xiaomi ($2.2B), Zhang Yiming of ByteDance ($77.3M), Wang Xing of Meituan ($2.3B), Yang Yuanqing of Lenovo Group ($15.4M), Li Yongxin of Offcn Education ($154.3M), and Colin Huang of Starry Night Foundation ($100M). After Xi’s remarks, many more are likely to follow suit. China cracking down on its tech giants and slapping hefty fines have also to be seen in the context of China’s “common prosperity” push. However, more serious issues of factional feud and feared financial coups are also cited as reasons behind their suppression.
Moreover, since some of the main drivers of China’s growth such as exports and real estate have hit the roadblock, China is striving hard to avoid the “middle income trap”. China desires to expand its middle class from the current 400 million to 800 million between 2021 and 2035. This is considered important for realising the goals of “dual circulation”, especially the “internal circulation”, i.e. the domestic cycle of production, distribution, and consumption for sustainable economic development. Professor Li Shi, a well-known scholar on income distribution in China, has pointed out that in 2019, the annual per capita disposable income of the 40% households was only 965 yuan per month, demonstrating that currently there are more than 560 million low-income people in China. Majority of these people reside in the countryside, and to raise the income levels of such a huge population is not going to be easy, given the signs of involution in Chinese economy.
Besides, since the “common prosperity” is directly linked to the “community with shared future for mankind” a dwindling growth at home may impact on China’s “Belt and Road Initiative” and “China’s dream of national rejuvenation”. The period between 2020 and 2035 is crucial when China wants to realise its “socialist modernisation” by raising the per capita income of its citizens to around US$30,000. In the words of Zhang Yongjun, deputy chief economist with the China Centre for International Economic Exchanges, “China will achieve the goal of becoming a medium-level developed country in per capita GDP terms by 2035 even if China’s average annual growth rate is 4.5 percent between 2025 and 2030 and about 4.0 percent between 2030 and 2035.” That may be the case, but questions are being asked when the Party-state owns everything and exercise ultimate control, why is there so much noise about the “third distribution”? Is it because the government’s coffers are empty owing to the overstretched BRI funding and doles or is the state re-enacting the slogan “overthrow the local despots and distribute land” (打土豪分田地) of the Mao era?
Finally, another takeaway from the 17 August meeting was the sudden promotion of Wang Yang in the Standing Committee of the Politburo. Wang’s name unusually appeared immediately after Li Keqiang, leading to speculation and rife that he is either likely to replace Li Keqiang as Premier or Xi Jinping as the General Secretary. Interestingly, as has been the custom for a successor, Wang led a delegation to Lhasa to attend the 70th anniversary of the “peaceful liberation” of Tibet. Hu Jintao and Xi Jinping as designated successors of the CPC had also participated in the 50th and 60th anniversary of China’s takeover of Tibet in 2001 and 2011, respectively. Wang succeeding Xi is very unlikely as the 66-year-old Wang will hardly ensure Xi’s political longevity and preserve his legacy. Li Zhanshu is believed to be his only close ally in the seven-member politburo. Though Wang has a close working relationship with Xi, however, to designate him as successor is mere speculation, and perhaps meant to send false signals to the international community that succession is on the cards before the 20th Party Congress in 2022.
B.R. Deepak is Professor, Center of Chinese and Southeast Asian Studies, Jawaharlal Nehru University.