- Karishma Vaswani
- BBC Asian Economic Affairs Correspondent
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China stated that its policies aimed at narrowing the widening gap between rich and poor are exactly what China’s current economic development track requires. But critics say that these policies will further control how companies and society are managed.
Although this “common prosperity” effort is aimed at the Chinese people, it may have a huge impact on other parts of the world.
One of the most obvious consequences of “common prosperity” is that the focus of Chinese companies has reverted to the domestic market.
The Chinese technology giant Alibaba has been growing in popularity globally in recent years. It has now pledged to invest US$15.5 billion to help promote China’s common prosperity and has established a special working group led by its boss, Zhang Yong.
The company said that it is a beneficiary of China’s economic development, “If the social and economic development is good, then Alibaba will also develop well.”
Its rival technology giant Tencent also expressed support, it has pledged to provide 7.75 billion US dollars.
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Zhang Yong, CEO of Alibaba.
A large Chinese company told me privately that the Chinese company is keen to show that it is working in accordance with the party’s requirements, but when it pushes more companies to publicly support Xi Jinping’s new vision, it is indeed “a bit shocking.”
“But then we gradually got used to this idea. It’s not about robbing the rich. It’s about rebuilding society and building a middle class. After all, we are a consumer company, so this is good for us.”
The luxury goods industry may suffer
If common prosperity means paying more attention to China’s emerging middle class, it may mean that global companies that cater to these customers will benefit.
Joerg Wuttke, chairman of the EU Chamber of Commerce in China, told me: “We can see that paying attention to the employment of young people is a good thing.”
“If they feel that they are part of the country’s social mobility, and this mobility is declining, then this is good for us. Because when the middle class grows, there will be more opportunities.”
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The two ladies visited a special fashion show of the Aria series held at the Shanghai Exhibition Center for the 100th anniversary of the Gucci brand.
But Woodk warned that companies related to the luxury goods industry may perform poorly.
“Chinese consumption accounts for about 50% of global luxury goods consumption. If the wealthy Chinese decide to reduce their purchases of Swiss watches, Italian ties and European luxury cars, then this industry will be hit.”
However, although Woodk admitted that China’s economy does need to carry out key reforms to increase the income of ordinary Chinese people, he said that common prosperity may not be the most effective way to achieve this goal.
Steven Lynch, chairman of the British Chamber of Commerce in China, also said that common prosperity does not guarantee that the middle class will grow as it has in the past 40 years.
What he likes to tell is how the Chinese economy has grown rapidly in the past few decades.
“Thirty years ago, a Chinese family could eat dumplings once a month,” he told me on the phone. He is currently in Beijing. “Twenty years ago, maybe they could eat one meal a week. Ten years ago, they could eat every day. Now they can buy a car.”
But Lynch said that so far, apart from the corporate social responsibility efforts of Alibaba and Tencent, Mutual Wealth has not brought any concrete results.
When talking about the recent crackdown on technology companies, he said: “Many industries have also immediately introduced many regulations.” “This has led to uncertainty and problems. If they turn to China, they really need the rest of the world. Place?”
New “Socialism”
The core of common prosperity is to make Chinese society fairer, at least in the eyes of the Communist Party. This may change the meaning of socialism on a global scale.
Wang Huiyao, founder of the global think tank, said: “The party now cares about ordinary workers, such as taxi drivers, migrant workers and couriers.”
“China wants to avoid the polarized societies of some Western countries. We have already seen that such polarization will lead to deglobalization and nationalization.”
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Two women wore protective masks when they passed a luxury store while shopping in Sanlitun, Beijing.
But people who have been observing China for a long time say that if the party wants to transform socialism with Chinese characteristics into another model is really what the party wants, then common prosperity is not the right path.
George Magnus, a researcher at Oxford University’s Center for Chinese Studies, said: “This is part of China’s tilt towards the left during Xi Jinping’s tenure, and part of its tilt towards greater control.”
Magnus added that common prosperity does not mean copying the European model of social welfare.
He said: “The implicit pressure is to comply with the party’s goals.” “High income and’unreasonable’ income will be taxed, and private companies will be pressured to donate to the party’s economic goals,” he said. “But no major measures will be taken on progressive taxes.”
Chinese Utopia from the top down
Obviously, common prosperity is an important part of China’s national and social governance under the leadership of Xi Jinping.
What follows is the promise of a fairer society, a bigger and richer middle class, and companies that will reward rather than just take it.
A top-down utopian China. The Communist Party hopes that it can become a viable model in the world, rather than a model provided by the West.
But this also brings up a problem: the Communist Party has more control and power.
For foreign companies, China’s environment is difficult, and common prosperity means that the world‘s second largest economy is even more difficult to cope with.