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Current Affairs

China’s common prosperity drive

Date: 06 September 2021 Tags: Miscellaneous

Issue

Achieving “common prosperity” would be the goal of China, as emphasized by Chinese President Xi Jinping.

 

Background

China is growing at a rapid pace. The economic growth has widened wealth gap between different sections. It has also threatened the basic ideology of communism.

 

Details

  • The idea of “common prosperity” is not new but rather an old concept. However, the recent crackdown by the government on industries has created concerns.

  • Business houses and corporate have been vary of the rhetoric growing within the ruling party circles to reign in technology giants.

  • Xi has been focusing his next Presidential goal on eliminating inequality after tackling absolute poverty and moving towards common prosperity by 2035.

 

Concept of ‘common prosperity’

  • China’s modern founding father Mao Zedong first coined the term in 1950s. The concept was repeated by Deng Xiaoping in 1980s to modernize the country.

  • Deng Xiaoping said that some regions and sections should be allowed to grow rich faster in order to achieve ultimate aim of ‘common prosperity’.

  • The Chinese version of socialism brought economic prosperity but it also brought to the forefront inequality between urban and rural areas.

 

Steps in achieving common prosperity

  • Curbing tax evasion

  • Limits on the hours that tech sector employees can work

  • Ban on for-profit tutoring in core school subjects and

  • Strict limits on the time minors can spend playing video games

 

Roadmap for common prosperity

  • The government will be using taxation and other income redistribution methods to expand the proportion of middle-income citizens and increase income of poor.

  • High-income firms and individuals have been urged to indulge in “third distribution”, which is charity and donations.

  • Many technology giants including Tencent have announced spending to achieve common prosperity and donations for disaster relief efforts.

  • The government is also looking at implementing property and inheritance taxes to tackle the wealth gap in the country.

 

Economic impact

  • The government has been extra careful not to destroy the private sector with such stringent measures as the role of private sector in wealth creation is immense.

  • Common prosperity model will also ensure that consumption drive growth may drive the economy in future rather than exports and investment.