China’s President Xi Jinping has warned that his government’s current push for “common prosperity”, which is likely to see a major overhaul of many sectors of the Chinese economy in coming months, will be “long term”.
The “common prosperity” campaign came into prominence after it was highlighted by Mr. Xi at a meeting of the Central Finance and Economic Affairs Committee in August. It has been seen by observers as underlining many of the major recent regulatory moves announced by the Party leadership that have alarmed foreign investors and wiped off close to $1 trillion in market value of major Chinese private tech and education firms since February.
These include anti-trust investigations of major private sector companies, such as Alibaba and Tencent, and overhauling the booming private education industry, which may be ordered to turn non-profit.
The broad campaign has ranged from curbing the growing influence of fintech and e-commerce giants to cracking down on the gaming industry and even celebrities and fan culture in China.
On Friday, the Party’s official journal, Qiushi or Seeking Truth, published for the first time Mr. Xi’s full speech at the August meet, which provides his most detailed comments yet on the “common prosperity” campaign.
He said the campaign would be long-term and was here to stay, and would be “the focus point” to ensure both the well-being of people and the Party’s “long-term ruling foundation”. He flagged growing income inequality around the world as a serious threat that would lead to the collapse of the middle class as well as social and political polarisation, saying it offered “profound lessons” for China.
The campaign, he said, would be based on several core principles, starting with encouraging innovation as a means to prosperity. This would require “more inclusive and equitable conditions for people to improve their education” in order to “prevent social stratification”. In July, the Party essentially banned the booming private education industry from raising funds and going public, leading to a crash in the share prices of major firms, and ordered the sector to go non-profit.
These moves, Mr. Xi said, would be aimed at “avoiding ‘involution’ and ‘lying flat’”, referencing two current buzzwords among young Chinese pushing back against the education and jobs rat-race, and an all-consuming work culture known as “996” - 9 am to 9 pm, six days a week. “Involution” refers to a feeling of stagnation, while “lying flat” has been deemed by some to be the answer, by opting out of the race and doing the bare minimum to survive.
The second principle was “adhering to the basic economic system” and “the public sector as the mainstay”. Regulators will “accelerate the reform of monopolistic industries” and “support the development of small and medium enterprises”, he said. The focus of these moves, Mr. Xi said, was on “expanding the size of the middle income group”. The authorities will more strictly regulate “high income” and “excessive income”, including by reforming the personal tax system.
With fintech and e-commerce companies, including Alibaba, Tencent, and the ride-hailing app Didi Chuxing, among those currently in the sights of regulators for “monopolistic” practices, the “common prosperity” campaign is expected to be broadened in coming months to include the financial sector and the many highly leveraged real estate firms, who have been warned that they cannot expect state bailouts.
Mr. Xi is “zeroing in on the ties that China’s state banks and other financial stalwarts have developed with big private-sector players,” the Wall Street Journal reported this week, with a “sweeping round of inspections” of financial institutions expected in coming weeks as part of a broader “push to curb capitalist forces in the economy”.
The campaign is expected to continue in the months ahead and in the lead-up to next year’s 20th Party Congress, a once-in-five-year event expected to be held next autumn, which will see Mr. Xi, who abolished term limits, begin his third five-year-term in office.
