214051314_MERICS China Essentials_210909
Short analysis
3 min read

Xi’s call for common prosperity signals a new period of populism, state regulation and interventionism

The term “common prosperity” (共同富裕) has long been part of the CCP’s ideological language. Under Xi, the term and an accompanying ideological framing of economic policy are making a comeback. The term represents the ideological core of Xi’s proclaimed ambition of building a socialist society. The foundation of this shift in policy was laid in recent years as the Party became increasingly wary of unconstrained market mechanisms and speculation. Runaway real-estate prices, rising inequality and surging costs for education threatened to tarnish the CCP’s economic achievements. 

Despite the Chinese leadership officially asserting to have eradicated extreme poverty in 2021, China’s economic development is marked by a widening wealth gap. The latest policy shift is aimed at addressing inequality, especially after it got even more pronounced during the pandemic. The CCP hopes its new line will shore up its ideological power and boost its popular appeal and so secure its legitimacy among the working and middle class.

Xi’s call for “common prosperity” also aligns well with the CCPs ambitions to exert more control over the private sector and high-flying entrepreneurs.  China’s private companies, especially those in the tech sector, controlled by wealthy entrepreneurs, have come under pressure in 2021. Beijing has targeted them for a number of issues, among them alleged infringements related to national security, monopolies and working conditions.

The private sector appears to be under siege as the CCP seeks to add more policy heft to its “Marxist guidance” of the economy. To rectify their alleged failure to contribute to a more equal society as envisaged by the CCP, companies are announcing high-profile corporate donations to charitable causes. Tencent and Alibaba, for example, have each pledged 100 billion CNY. But solving the longstanding problem of inequality requires more than symbolic gestures on one side and revived Party slogans on the other. 

MERICS analysis: “So far, the campaign-style implementation of ‘common prosperity’ is primarily political signaling,” says Max J. Zenglein, Chief Economist at MERICS. “There are no quick fixes for China’s income-distribution problem. Addressing it will require institutional changes, including reform of the household-registration system, taxation, and wealth redistribution. The campaign has mainly focused on high-profile targets in the private sector, including flashy billionaire founders. But the CCP will need to strike a careful balance not to spook these companies and entrepreneurs too much. After all, China needs its private companies to foster economic growth and innovation.” 

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Updated on September 10, 2021