What the West gets wrong about China's 'common prosperity'
Xi Jinping's agenda is more Confucian than socialist
Lauren A. Johnston is visiting senior lecturer at the University of Adelaide. She is founder and managing director of New South Economics.
Presiding over the 10th meeting of the Central Financial and Economic Affairs Commission in August last year, China's President Xi Jinping stressed the importance of promoting "common prosperity."
For many in the West, this abstract notion has since been imbued with fears of a return to socialism with autocratic characteristics. Subsequent financial donations by leading Chinese tech entrepreneurs have exaggerated those fears.
Limited use of common prosperity at the 'two sessions' gathering of China's top decision-makers earlier this month has since been interpreted as a sign that the agenda was passing. But far from being a hair-brained idea of Xi's, the concept has Confucian roots that may well guide China's high-quality development agenda through to midcentury.
First, the phrase itself was not crafted by Xi. Mao Zedong used it in the 1950s, as did Deng Xiaoping in 1986, when he told a delegation of visiting U.S. investors that China would open its coastal provinces first, thereby "letting some get rich first" and later allow the whole country to enjoy common prosperity.
Since then, most of the media and academia have only cited the "let some get rich first" element, arguably distorting common understanding of an otherwise openly stated agenda.
Professor Jianbo Zhou, head of economic history at Peking University's School of Economics, recently elaborated the traditional Chinese cultural origins of the contemporary common prosperity agenda in a post on the university's website.
Going as far back as 1046-256 BCE to China's Zhou dynasty, professor Zhou referred to Confucius's "Book of Rites," detailing the social and administrative forms of the datong, or great unity, world. In the datong world, widows and the lonely are supported, and, according to Zhou, in the minds of the Chinese people, this is the ideal Chinese society.
To underpin support for those widows, Confucianism argues that governing starts with enriching people but requires avoiding excessive differentiation between the rich and the poor. Happiness alone, that is, is not as good as happiness with others.
China's Taoism philosophy observes that an imbalance between the rich and the poor causes explicit disadvantages, including that wealth itself can become at risk. Pointing to Buddhism, economic historian professor Zhou emphasized that a "rational flow of wealth among social classes" encourages the accumulation of virtue with the idea of retribution and reincarnation. In a historical-cultural context, that is, common prosperity is seen as the higher goal of economic and social development.
Why, though, did Xi resurrect the idea in mid-2021? This probably has more to do with the fact that in February 2021, Xi declared the official eradication of absolute poverty in China, a long-standing national goal known as the first of two centennial goals set to mark the 100th anniversary of the founding of the Chinese Communist Party. It is known as the Xiaokang goal, where Xiaokang refers to an equivalent of moderate prosperity.
Going back to the concept of datong, it turns out that this can be directly paired with moderate prosperity, Xiaokang. Either is good, but datong is the greater good, and Xiaokang is second best, for datong is associated with a prehistoric golden age and the concept of the ideal society.
With China still moving on a journey of national rejuvenation, Xi's 2021 resurrection of the idea of common prosperity arguably marks China's transition from the Xiaokang goal to what is implicitly a successor datong goal. Xi himself noted in another speech in August last year that "by the middle of this century, common prosperity for the entire population will be basically achieved, and the gap between income and consumption levels of residents will have been narrowed to a reasonable range."
As it relates to modern-day economic policy reality, this means renewing the push toward high-quality development, something that requires high-quality workers. China's large share of poorer youths, in other words, will need to receive an elevated share of national resources to ensure national development and the shift to high-quality development.
This might help explain why China announced recently that a series of new technical colleges would be opened in China's central and Western provinces, which are rich in lesser-educated youths.
When a Ministry of Finance official noted at the 2022 two sessions meetings this month that "central government transfer payments to local governments will increase by 1.5 trillion yuan, to reach 10 trillion yuan ($1.5 trillion)," that 18% increase equivalently represents a direct response to the official common prosperity agenda.
With geopolitical tensions grabbing so much global attention and further challenging employment conditions in China, there may not have been any attention-grabbing common prosperity headlines coming at this year's two sessions. Instead, the focus was on maintaining growth and creating jobs.
Yet contrary to prevailing popular opinion, this too is congruent with the ancient and new Chinese ideas of common prosperity. The ancient Confucian view sees enrichment as a precondition for the redistribution that underpins common prosperity, and which supports widows and the lonely.
Hence, rather than seeking to inhibit wealth creation or to grab wealth already created by others, such as Jack Ma, Xi's agenda could be that now that some have got rich first, it is necessary to ensure that the rest get rich concurrently. It may also be to literally lay the cultural foundations for the coming need to support many millions of widows. Over the next two decades, China's population will reach a historic peak in terms of the total number of elderly, and Chinese women on average live three years longer than Chinese men.
Common prosperity, then, is something of a next step in the journey toward national rejuvenation that is congruent with both Deng and Confucius. It may best be understood as an abstract automatic stabilizer against any further increase in inequality and possibly also as a means of reducing inequality.
Some in China have got rich, as Deng planned. Now Xi wants to help the rest catch up by midcentury. Xiaokang, phase one of China's contemporary modernization, has been achieved, and phase two, common prosperity, has begun.
Underlying all of this is the most important message of all: contrary to popular belief, whether Xi is China's leader this time next year or not, Beijing's door is likely to be open to local and foreign investors with ideas for helping the rest of China catch up.