News//Common Prosperity

We can allow some people to get rich first and then guide and help others to get rich together … We can support wealthy entrepreneurs who work hard, operate legally, and have taken risks to start businesses … but we must also do our best to establish a ‘scientific’ public policy system that allows for fairer income distribution.

Xi Jinping, China's president. August 17, 2021

Wealth redistribution

Redistributing the resources of the rich to increase the resources of the poor has been a goal of Xi Jinping since before he came to power in China. But in recent months, Xi's calls for "Common Prosperity" across China have increased.

CNBC says that China will achieve "Common Prosperity" by providing moderate wealth for all, rather than just a few. The idea is basic to communist philosophy. Communism calls for equality across every demographic. Ideally, all wealth and goods are equally distributed in a communist society.

But in China there is a huge economic gap between the wealthy and the poor. That puts the weight for lifting up the poor squarely on China's wealthy. Programs are planned that will curb “excessive” incomes and that will encourage the wealthy to give back more to society.

Tertiary distribution

Xi promotes “tertiary distribution of wealth.” According to the Chinese Communist Party, primary distribution of wealth occurs spontaneously in the economy as workers are paid. Secondary distribution is the redistribution by the state's spending and through its social safety nets. Tertiary distribution requires the rich to “participate in some charitable causes and assume more social responsibilities. To return the wealth taken from the society to the society, and use it to promote social development.”

From a Western point of view, this sounds like China's "Common Prosperity" efforts will encourage more charitable giving. In China, however, tertiary distribution is not motivated by an altruistic desire to help others. It is demanded by the government. Tertiary distribution may be funded by increasing taxes, including taxes on real estate, and by introducing inheritance taxes.

Quelling fears

Reports about Common Prosperity have raised fears among China’s wealthy. In response, on August 26, Han Wenxiu, deputy director of the Office of the Central Financial and Economic Affairs Commission, said the country’s push for common prosperity allows for “the existence of a certain gap” [in wealth] and the country encourages people to work hard and bring innovation. It also allows some to “get rich first” and then guide and help others to become rich.

Sources: CNBC. South China Morning Press, Bitter Winter, Foreign Policy, Caixing Global