During a finance and economic meeting Tuesday, Chinese President Xi Jinping emphasized the need for "common prosperity." Xi urged for the curbing of "excessive incomes," while also calling for high-income individuals and companies to give more to society.
China's goal of "common prosperity" is partly the idea behind its recent regulatory crackdown on major tech companies and their monopolies over various industries. China has been attempting to rein in these companies to allow for healthy competition by eliminating anti-competitive and unfair business practices.
State media have repeatedly clarified that the idea behind "common prosperity" is not a form of equal distribution but a move towards greater equality. The term, which has been the underlying theme in numerous political discussions, generally leans more towards a shift to moderate wealth for all.
Analysts at The Economist Intelligence Unit said Chinese authorities will likely be more sensible and practical in implementing measures to achieve their goal of improving financial equality. Analysts said implementing measures such as higher taxes for rich individuals and companies could negatively affect investment. This could then lead to higher capital outflows, an outcome the government will want to avoid.
With the recent regulatory crackdowns and plans to implement measures to curb excessive profits, analysts expect privatization to slow down in sectors such as education and medical care. Analysts expect the Chinese government to also enhance its scrutiny on pricing and affordability.
Over the past decade, income inequality in China has increased significantly. According to a report published in 2019 by the Paris School of Economics, the top 10% richest people in China earned an estimated 41% of the national income in 2015. This was a big jump from the 27% recorded in 1978. Meanwhile, low-income earners only had a 15% share of the national income, a big dip from the 27% recorded in 1978.
Last year, the Chinese government renewed its pledge to completely eliminate extreme poverty. Officials claimed that they had already eliminated most of it through the implementation of key measures.
"China has affirmed its effort to rebalance the economy toward labor, tackling social inequality with the redistribution, social welfare, taxes, and inclusive education," analysts at Morgan Stanley said in a report published Wednesday.
