Something big is happening inside China. With the latest ‘common security’ concept, President Xi Jinping is rebooting domestic issues, with long-term consequences to its private sector, innovation, employment and market economy. Xi’s ire has shifted to the private sector, which constitutes over 60% of China’s GDP, 70% of technological innovation, 80% of urban employment and has over 90% of market players.
‘Common Prosperity’ has emerged in the Chinese lexicon recently as a panacea for all its socio-economic ills. This comes in the wake of announcements on completing the “poverty alleviation” campaign. Like many other such concepts in the Communist Party (CCP)-dominated political space, such as “getting quick rich” (Deng Xiaoping), “three represents” (Jiang Zemin), “harmonious world” (Hu Jintao) and others, this is also expected to have a short political shelf life, though the projections are till 2035.
The ‘Common Prosperity’ slogan is currently an effort to reinforce the CCP’s hold over the private sector, technological innovation, cultural industry and others that became prominent in the last four decades of reform, catapulting China to the world’s second largest economy. The reforms seemed to have loosened the CCP’s (or Xi Jinping’s) hold over the levers of power. ‘Common prosperity’ is to reboot and apply a mid-course correction. In the run-up to next year’s 20th party congress, these are significant developments in China.
On August 17, Xi, addressing the 10th meeting of the Central Financial and Economic Affairs Commission, spoke about ushering ‘common prosperity’. Xi called it “an essential demand of socialism and an important characteristic of Chinese-style modernisation.” He talked about “adhering to people-centred development ideology,” and discussed “coordinating and doing the work of forestalling major financial risks well.” Xi is said to have invoked ‘common prosperity’ 65 times this year.
One of the issues to be addressed is the growing inequality between urban and rural incomes in China – measured in Gini coefficient – which is one of the highest in the world. China’s official figures put it at around 0.4 on a scale of 0 to 1 (with 0 referring to equality, while reaching 1 would mean socio-economic breakpoint). China had stopped issuing official data since 2000, although a Southwestern University of Finance and Economics report of 2012 suggested that the Gini coefficient has reached an alarming 0.61. China has more than 1,000 billionaires, double that of the US and other countries – who have quickly become the target of the ‘common prosperity’ campaign.
Xi’s latest campaign has attacked the country’s bourgeoning private sector -- ed-tech, fin-tech, food delivery and ride hailing services -- and the cultural industry. After Alibaba chief Ma Yun (Jack Ma) was silenced last year, as with Tencent, Meituan, Didi Chuxing and others, the rich coastal province of Zhejiang became the victim, with the party chief of its capital city, Hangzhou, Zhou Jiangyong replaced and put under “investigation” on August 21. Coincidentally, Alibaba’s headquarters is in Hangzhou, and Zhou’s family allegedly sought shares in the company.
That the private sector is falling in line can be seen from the fin-techs and others pledging their hard-earned money to the country’s welfare schemes. Tencent donated an entire year’s profits and contributed $10 billion for a fund to promote ‘common prosperity’. Alibaba, under regulatory siege for the past one year, announced $15 billion. Several Chinese economists dubbed this campaign as “robbing the rich to give to the poor”.
While Xi may be trying to reduce the influence of his political rivals in the CCP, the recent campaign is expected to unsettle the private sector in the short term, with an expected slow-down due to the “double circulation” strategy under implementation, too. The campaign is expected to increase property tax on the private sector, regulatory mechanisms and other measures and create further fissures in global supply chain mechanisms.