Author: Editorial Board, ANU

Squeezing every political development in China today into a black box of the natural behavior of an authoritarian Marxist-Leninist state is the daily pastime of political commentators and experts of all stripes and colors across the world. This fallacy, passed for analysis, does not add much to understanding what is happening in China and why.

There is no doubt that the legacy of ideology and political culture weighs heavily on the decisions of political leaders everywhere, especially in China where its track record and institutions are so deeply rooted. But the enormous changes and problems facing China and its leadership at this point in the country’s history defy interpretation through a one-dimensional ideological lens. Why leaders and their advisers come up with particular policy platforms and prioritize certain strategies to deal with them warrants more detailed and careful analysis.

President Xi Jinping’s elevation of “common prosperity” into a political campaign to secure its political future at the 20th Party Congress next year is a monumental example.

Is this “movement to the left” a reaffirmation of the “power of the Communist Party of China (CCP) as an institution over the political, technocratic and administrative agencies of the Chinese state, as we saw in empowerment of the Party within state-owned enterprises and private enterprises as well as the return of Marxist-Leninist ideology as the organizing principle of Chinese policy, ”as claimed by some such as former Australian Prime Minister Kevin Rudd? Or are there other reasons that could explain where Xi and the Chinese leadership are heading?

The political debate in China that has erupted around this great policy shift that seeks to rewrite the Chinese social contract around a political meme that dates back to Chairman Mao Zedong is certainly all over the ideological shop.

In the blogosphere, the relatively unknown Li Guangman applauded the crackdown on everything from internet companies, foreign-leaning movie stars, tax evaders, online gaming, private tutoring and under-masculine internet stars. , and hailed common prosperity as the dawn of a new cultural revolution. . His cry from the past even reached the People’s Daily and the World time. Economists Zhang Weiying from the National Development School of Peking University, Zhang Jun, dean of economics from Fudan University, and Li Daokui from Tsinghua University were among those who warned that “Losing confidence in market forces and relying on frequent government intervention, (would lead) to common poverty”. They were surprisingly joined by Hu Xijing, editor-in-chief of the World time and certainly no “capitalist trucker,” who dismissed the idea that something like a cultural revolution was on the cards, and proclaimed that China’s reform and opening-up is indeed alive and well and there is no would not withdraw from the policies of the 18th CPC National Congress.

Vice Premier Liu He added his weight to the idea that the market and private entrepreneurs were at the heart of China’s success. “The private sector contributes more than 50 percent of tax revenues, more than 60 percent of GDP and more than 70 percent of technological innovations,” Liu said. “It provides over 80 percent of urban employment and accounts for over 90 percent of market entities in China.”

But China has a growing income and wealth divide – the legacy of decades of largely successful market-driven growth. This has created a middle class of 340 million people earning between 15,000 and 75,000 US dollars per year, a number expected to reach 500 million by 2025. In 2020, China also had around 1,100 billionaires and 5.2 billionaires. million millionaires, in US dollars. The richest 1% of Chinese held 30.6% of the country’s wealth, up from 20.9% twenty years ago.

Meanwhile, Premier Li Keqiang pointed out last year, the country had 600 million people living on a monthly income of 1,000 yuan (US $ 154), barely enough to cover the monthly rent in a city. Chinese medium size. The Gini coefficient of income has hovered between 0.46 and 0.49 over the past two decades – a level of 0.40 is generally considered a red line for inequality. The wealth gap is even more marked. The Gini coefficient of wealth fell from 0.599 in 2000 to 0.704 in 2020 – an extreme that would lead to social instability in most countries.

In our main article this week, Cai Fang suggests that the Chinese leadership’s reiteration of common prosperity as the main political goal is therefore very timely.

“This is a logical continuation of the long-term task of eradicating poverty and favoring the low-income group towards the middle-income group,” Cai says. “There is a need to address the challenges facing China’s economic development and social cohesion. The Chinese economy is increasingly constrained by weakening demand as its population ages rapidly. Enlarging the pie and dividing it more equitably is the key to increasing the contribution of household consumption to economic growth ”. And political strategies to address equality are common to international experience and common practice. China’s real GDP per capita is expected to rise from US $ 10,687 in 2020 to US $ 23,000 in 2035. In such a period of development, according to cross-country data, the average ratio of public expenditure to GDP increases from 26 % to 36 percent, ”says Cai.

The market economy, it has been clearly established, plays the main role in the distribution of wealth and income. After that, the government steps in to redistribute income and ensure the well-being of society as a whole. Finally, the rich have a role to play through charity and social responsibility, shaping the culture of a supportive and inclusive community.

Xi Jinping, whatever one may say of him, inherited a China that in many ways made the last four decades of 19th-century America – with its thief barons, rampant corruption, gross inequalities and its obscene concentrations of wealth – a picnic in the park. It was the so-called American Golden Age, as James Kynge recalled in the Financial Time last month. A sort of progressive era followed in the United States, but with much more success in European industrial states.

China needs its own progressive era today. This means a huge upheaval in the regulation of new and old markets and monopolies, including in the public enterprise sector. It means a massive overhaul of the tax and income transfer system where China lags behind the moderately wealthy corporations it now seeks to emulate – and it won’t be easy. And that means entrenching a culture of social responsibility that has seemed a bit in tatters for quite some time.

If this is the goal of the Common Prosperity Campaign, it is a relevant, very pragmatic and politically astute strategy for addressing the challenges China is currently facing. It aligns itself with the ideological stars but they only weakly provide its navigation benchmarks. It is a campaign in which Xi is sure to win the political race.

Of course, the fulfillment of the mandate is quite another matter.

The EAF Editorial Board is located at the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.


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