China claims that its policies targeted at closing the increasing wealth gap are exactly what the country needs at this point in its economic trajectory, but opponents argue that it comes with even more control over how business and society are controlled.
While the “shared prosperity” goal is aimed only at the people of the country, it has the potential to have far-reaching consequences for the rest of the globe.
The redirection of corporate China’s emphasis to the home market has been one of the most apparent outcomes of shared prosperity.
Alibaba, whose worldwide reputation has risen in recent years, has pledged $15.5 billion (£11.4 billion) to support shared prosperity projects in China, as well as establishing a special task force led by its CEO Daniel Zhang.
Alibaba claims to be a benefactor of the country’s economic growth, claiming that “if society and the economy are doing well, Alibaba will do well.”
Tencent, a rival tech behemoth, is also making a pitch. It has made a $7.75 billion donation to the cause.
China Inc. is eager to demonstrate that it is following the Party’s mandate, but one major Chinese company told me privately that the push for more companies to publicly support Xi Jinping’s new vision came as a “bit of a shock” when it first began.
“But after a while, we become accustomed to the concept. It’s not a case of robbing the wealthy. It’s all about reshaping society and bolstering the middle class. And, at the end of the day, we’re a consumer goods company, so it’s excellent for us.”
The Change Begins With Middle-Class Luxury
If increasing attention on the rising Chinese middle class is a result of shared wealth, it may be a benefit for global firms that cater to these clients.
“We can see that the emphasis on young people finding work is beneficial,” said Joerg Wuttke, head of the EU Chamber of Commerce in China.
“It is beneficial to us if they believe they are a part of the country’s fading social mobility. Because as the middle class expands, so does the number of opportunities available.”
Businesses connected to the luxury industry, on the other hand, may not do as well, according to Mr Wuttke.
“Chinese spending accounts for almost half of global luxury consumption – and if China’s wealthy opt to purchase less Swiss watches, Italian ties, and European luxury automobiles, the sector would suffer.”
While Mr Wuttke recognizes that China’s economy requires significant adjustments in order to raise the ordinary Chinese person’s income, he believes that common prosperity is not the most effective route to go.
Common prosperity, according to Steven Lynch of the British Chamber of Commerce in China, is not a guarantee that the middle class will expand at the same rate as it has in the previous forty years.
He enjoys telling stories about how fast China’s economy has grown in recent decades.
“A Chinese household may enjoy a bowl of dumplings once a month thirty years ago,” he informed me over the phone from Beijing. “They might have been able to eat a bowl once a week twenty years ago. That was not the case ten years ago. They may now purchase a vehicle.”
But, according to Mr Lynch, common prosperity hasn’t yet resulted in anything substantial, aside from Alibaba and Tencent’s corporate social responsibility activities.
“A lot of sudden restrictions emerged on a number of industries,” he added, referring to the current onslaught on technology businesses. “This creates ambiguity and raises concerns. Do they really need the rest of the world if they are going inward?”
Socialism May Be On The Horizon
Common prosperity, at least according to the Communist Party, is about making Chinese society more equal. And this has the potential to change the definition of socialism throughout the world.
“The Party is increasingly worried about ordinary employees, such as taxi drivers, migrant laborers, and delivery boys,” says Wang Huiyao of the Beijing-based Centre for China and Globalisation.
“China wishes to prevent the polarized society that certain Western countries have, which has resulted in deglobalization and nationalization,” says the statement.
Long-term China observers, on the other hand, argue that if the Party truly wants to turn socialism – with Chinese features – into an alternative model for the rest of humanity, then common prosperity is not the way to go.
“It’s part of the leftward shift and part of the lurch toward ever greater control that has been characteristic of Xi Jinping’s rule,” says George Magnus, an associate at Oxford University’s China Centre.
Mr Magnus goes on to say that achieving common prosperity does not imply adopting a European-style social assistance system.
He claims that “the underlying pressure is to cooperate with the Party’s goals.” “There will be a tax on wealthy and ‘unreasonable’ salaries, as well as pressure on private businesses to give to Party economic goals,” he adds, “but there will be no major shift toward progressive taxation.”