Chinese President Xi Jinping
Aris Messinis | Swimming pool | Reuters
BEIJING – Chinese President Xi Jinping stressed at a financial and economic meeting on Tuesday the need to support moderate wealth for all – or the idea of ”common prosperity,” which analysts say is at the root of the latest regulatory crackdown on tech companies.
Significantly, the meeting was the first that Xi has conducted publicly in a two-week period of calm. Chinese leaders typically spend in early August in secret political talks at a resort town in Beidaihe, about a three-hour drive east of Beijing.
The meeting called for “a reasonable adjustment to excess income and to encourage higher income groups and businesses to come back into society more”, state media said in Chinese, according to a CNBC translation.
The leaders also made it clear that common prosperity does not mean prosperity for a few and is not a form of equal distribution, state media said. Rather, progress towards the goal would occur in stages, according to the report.
Providing “common prosperity” has emerged in recent months as an underlying theme of the Chinese political debate. The term is generally understood as moderate wealth for all, rather than a few. But it remains a vague and frequently used slogan.
Yue Su, senior economist at The Economist Intelligence Unit, said in a statement that she expects the authorities to be pragmatic in the implementation.
“Considering that increasing taxes on high-income groups and returns on capital can hamper investments and potentially lead to capital outflows, the Chinese government will not completely ignore the impact of redistributive policies on the economy. economy, ”she said.
She added that privatization is likely to slow down in public services such as education, elderly care or medical care, with authorities at the very least becoming stricter in monitoring prices and affordability.
Income inequality among China’s 1.4 billion people has increased in recent decades. The richest 10% of the population earned 41% of national income in 2015, up from 27% in 1978, according to estimates published in 2019 by Professor Thomas Piketty of the Paris School of Economics and a team.
But half of the low-income population saw their share of national income drop to around 15%, down from around 27% in 1978.
This year, urban residents of the coastal city of Shanghai had an average per capita disposable income of 7,058 yuan ($ 1,091) per month, well above the 4,021 yuan for residents of cities across the country, and well above of 1,541 yuan for rural residents, the data showed.
The Chinese government claimed it eliminated extreme poverty in the country at the end of last year. This marked a first step towards achieving the longer term commitments of the ruling Chinese Communist Party, which celebrated its 100th anniversary in July.
“In elaborating on the goal of” common prosperity “, China affirmed its efforts to rebalance the economy towards work, by tackling social inequalities with redistribution, social protection, taxes and inclusive education Morgan Stanley analysts said in a report circulated Wednesday, noting one goal – “to increase the economy’s share of the middle-income group.”
Based on the highest economic policy meeting, analysts said they expected additional measures to support economic growth, such as a reduction in the reserve requirement ratio.
Data for July showed that China’s economic growth has slowed more than analysts expected, including spending figures for individual Chinese consumers.
However, economists noted that growth is not as important to Beijing this year as tackling long-term issues such as debt build-up and risks in the vast real estate market.
“Finance is at the heart of the modern economy, with links to development and security,” CNBC’s translation of state media said, citing Xi’s remarks at Tuesday’s meeting. “It must follow the principles of commodification and the rule of law, and coordinate the prevention and resolution of major financial risks.