During the four decades of reform and opening-up, China established a primary distribution institution based on a competitive market economy without equalitarianism. However, loose supervision of some industries and flaws in secondary income distribution, such as taxation, subsidies and corruption, have facilitated unreasonably high incomes.
“In a society where distribution is very unequal, talking about equality of opportunities is meaningless,” Li Shi said.
To realize common prosperity, Li suggested the government help the market play a more decisive role in resource distribution and reform policies that result in unfair income distribution, such as labor discrimination based on household registration (hukou), which can hold back labor migration, and different pension systems for government and enterprise employees. As for secondary distribution, Li suggested improving taxation’s role in adjusting incomes, increase financial assistance to low-income groups, and giving all people access to public services wherever they live.
The government is taking some measures. In 2021, China’s State Administration for Market Regulation slapped substantial antimonopoly fines on China’s leading e-commerce platform Alibaba and leading food delivery platform Meituan. More recently, regulators ordered WeChat to stop blocking links to other platforms.
In February, the Chinese government announced that absolute poverty had been eradicated nationwide and pledged to continue alleviation work. The same month, the government issued its “2021 No.1 Document,” which proposed to further promote the rural revitalization programs China started in 2017.
Following the August FEAC meeting, Tencent announced a 50 billion yuan (US$7.1b) corporate responsibly project to promote “common prosperity.” The next month, Alibaba announced a similar donation, pledging 100 billion yuan (US$14.3b). Other major companies such as Meituan, Xiaomi and ByteDance made large donations to charitable projects.
Commentators widely see the measures as responses to the government’s call for “third distribution.”
However, some online have accused the government of “robbing the rich to subsidize the poor.” Officials have denied such accusations, reiterating that common prosperity will never be an equal division of wealth.
Li Shi said authorities face three major challenges to reform the present distribution: how to maintain income growth for low-income groups at a higher rate than high-income groups, expand the middle class and effectively adjust high incomes. He also warned against potential resistance to adjustments from vested interests and monopolies.
A property tax, which has long been pending, is a good example of this balancing act. Authorities have to prevent the tax from negatively affecting low-and middle-income groups while providing a solution that is minimally disruptive.
In June, the central government named Zhejiang Province as a pilot area for promoting common prosperity, as this relatively rich province has taken the lead in many economic reforms in the past. But many analysts argued that policy should be tailored to regions.
“We should conduct sufficient studies... when exploring common prosperity. We have to decide which regions should take the lead in promoting common prosperity and which measures are fundamental,” Liu Yuanchun, vice president of the Renmin University of China, said in an August interview with media outlet Economic View, a China News Service affiliate. “Regions and groups may understand common prosperity differently, so it’s very hard to reach an effective consensus,” he added.
“We must realize that the focus of distribution reform is to eliminate unfairness, which is a tough and complicated task for the long term and should be combined with market economy reforms... We should not expect the income gap to decrease over the short term,” Li Shi told NewsChina.