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How will China change in 10 years under Xi’s common prosperity push?

Citizens speak out.
Image: Bloomberg

It’s been a year of overwhelming change for China, and the fundamental shift in the relationship among the country’s government, businesses and citizens is a long way from complete.

President Xi Jinping’s push for “common prosperity” — aimed at narrowing the nation’s persistent wealth gap — underpins moves to limit the power of China’s technology giants, to cool ever-rising house prices, to encourage philanthropy and to embrace clean energy. The drive has dovetailed with a clampdown on the entertainment industry that has targeted livestreamers and actors over tax evasion, and placed “improper” celebrity culture under scrutiny.

The changes look set to last. A landmark historical resolution published in November — only the third of its sort in the Chinese Communist Party’s history — puts common prosperity at the heart of the government’s aims. The doctrine also sets up Xi, who is expected to secure a precedent-breaking third term at next year’s party congress, to potentially rule China for life.

While the average age of the party’s Central Committee is about 60, and the president himself is 68, the shifts being implemented now will most profoundly affect the lives of younger Chinese people. We spoke to up-and-coming voices in some key areas of the economy about their outlook for the country.

The realities of life in China today are reflected in more than just their words. Controls on free speech have tightened under Xi’s leadership, and some interviewees sidestepped more politically sensitive questions. Their comments are broadly optimistic, but many Chinese people feel much less upbeat about the future. Our group also skews male. That’s not by design, but it is a reminder of the staggering dominance of men in China’s power structures.

Nonetheless, these interviews offer a snapshot of where the country stands and where it’s heading.

“The next era is artificial intelligence and automation replacing people’s work — technological unemployment. Globalisation also means some jobs will go to the overseas market,” Ren said. “We will need government and society to carry out social distribution, so that more people can smoothly transition during this technological transformation.” Ren argues that China’s socialist values will allow it to better adapt to the future compared with places like the U.S., which will struggle with social and ideological division. The Chinese system — which combines traditional values such as altruism and a sense of community with elements of socialism and a market economy — will offer a political model that is a major contribution to humanity, he added.

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Reintroducing common prosperity heralds a shift in the relationships between different social groups, Ren Yi said. Photographer: Yan Cong/Bloomberg
Ren said he and those around him are paying more attention to philanthropy and making donations, as common prosperity urges members of society to “embrace each other.” Reintroducing common prosperity is a “significant event” that heralds a shift in the relationships between different social classes and groups, and Ren expects the idea to be further elevated during next year’s national party congress.

Common prosperity is not just an administrative measure, it’s a value, according to Ren. Conspicuous consumption, “while certainly not barred, will be discouraged and looked down upon by society.”

Tech giants around the world are becoming so powerful that they’re “superseding nation states,” according to Suji Yan, and the Chinese regulatory crackdown is Beijing’s way of reasserting government control.

As a believer in a “decentralized digital world” and open-source systems, Yan argues that facilitating heavy government regulation and supporting tech companies’ striving for greater power than whole countries are both “super bad.” He is “trying to think about a better alternative.”

According to Yan, the biggest tech companies expect every aspect of daily life to become increasingly digital — from communication and currency to voting and governance. China’s common prosperity drive is designed to “pull money out of the pockets of tech giants,” Yan said, and he expected to see similar crackdowns in Western countries in the next three to five years.

He said the Chinese legal system is robust, but laws were only really enforced once a company or individual is found to be “problematic” and they were accused of having “violated this and that” — an approach he describes as “quite controversial.”

He sees a danger of the world becoming less connected over the next 10 years, as Covid-19 affects our ability to communicate and to physically interact. That could mean sovereign countries becoming more “stand-alone,” with few international businesses and little communication.

“We’re definitely citizens of a certain state,” he said, “but can we be native digital citizens and share a larger dream with the rest of the world?”

In 10 years, Lillian Li said the “more symbiotic relationship of tech firms with the government” kick-started by the common prosperity drive will still be happening.

She sees common prosperity as “a very lofty term for what I think is actually quite a common concept” — that everyone should have access to the same living standard. “In that way, it’s not too different to what is commonplace in Europe.”

That said, “whenever there is a ‘societal problem’ in Europe or the U.S., I think people’s first reaction is to call on market forces to correct it,” according to Li. In China, meanwhile, “the default is people want government intervention.”

In Li’s view, the growing middle class is “great news” for international companies. “When you look at reports, the biggest market for luxury right now in the world is third- or fourth-tier cities in China,” she said. “These are the rising beneficiaries of common prosperity.”

And she said that foreign investors are on equal footing with local Chinese investors, and sometimes even have an advantage.

Makers of software that can be linked to national security “will not be taking money from foreign investors, as a point of national interest. But let’s be honest, that is exactly the same case for any U.S. company or European company as well. For almost every other category, the founder is not sitting there being, “Is this a foreign investor? Is that a domestic investor? Where’s the money coming from?”

“China has generally positioned itself as being open and wanting to engage,” Li said. “It might not always remain on message all the time, but I do believe, when you look at the policies, that is actually what they intend to do.”

She said that on the ground in China, “it’s very energising to deal with people who do have a true sense of optimism about the future.”

China’s shift to greener energy will benefit different parts of the country unevenly, according to Li Shuo, and resolving these inequities is a “very big challenge” for the government as it pursues common prosperity.

It’s “unavoidable that some groups may face more challenging economic prospects” than others, Li points out. Places like the electric-vehicle hub Shenzhen will benefit disproportionately, he said, while areas that rely on traditional industries — such as the coal-belt province of Shanxi — will have to undergo economic restructuring.

Over the next 10 years, Li expects emerging business models to improve people’s quality of life as well as helping China to achieve its goal of carbon neutrality by 2060. He mentioned the bike-sharing industry as a relatively recent example.

And while many younger Chinese people today have relatives who have worked in heavy industry, he expects that to become uncommon within a decade. “The proportion of these industries in China’s economy will certainly decline further,” he said.

Reaching zero-carbon status within a few decades would be almost like “science fiction” for many developed countries, Li said. If there’s one country with the resolve to achieve it, “past history tells us it’s China,” he argued, pointing to the speed of economic development in recent decades. The country’s environmental improvement will be driven by internal forces, he said, as external obligations wane in the face of tensions with the West.

In a decade, China will be distinct from other developed economies in many ways, Feng argued. Those include having a more balanced relationship between the public and private sector, rather than relying on a very dominant private sector as many Western countries do.

The Chinese government sees the state-owned sector as being able to create an economic buffer in a way that private enterprises cannot, especially in times of crisis. In situations like the pandemic, China can mobilize the public sector, while the private economy is only focused on cutting headcount and reacting to profit, Feng said.

The relationship between urban and rural China will become more balanced, Feng said, and the line between the two will blur. Revitalising the countryside is a high priority for the party, he said: “China realizes that in order to continue the current rate of growth, it has to leverage the rural population that was not a major force of consumption before.”

Younger people are also more confident, having grown up while China is racing towards becoming the world’s largest economy and the U.S. is declining, Feng said.

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“China’s younger generation will turn even more inward toward understanding Chinese culture,” Feng Chucheng said. Photographer: Qilai Shen/Bloomberg
“A lot of China’s younger generation will turn even more inward toward understanding Chinese culture, revitalising Chinese culture,” he said, “rather than worshipping American and imported Western cultures.”

It would be “terrible” if in 10 years, people couldn’t see opportunities to improve their livelihoods even if they work hard, Feng said. For China’s younger generations now, it’s becoming more difficult to get rich, he said: Those who already achieved wealth have blocked the way and are using their money to guarantee a good future for their children.

Beijing will need to find a balance between “socialist core values,” he argued, and people’s natural desire for materialistic goods. He thinks the state will likely encourage people to focus more on development of the mind rather than superficial or meaningless admiration, as evidenced by the recent crackdown on idol culture.

Xin expects technological innovation in the consumer space to develop fast in China over the next 10 years, and for more ideas like livestreaming to emerge that developed nations can learn from.

He said livestreaming changed his life after growing up in rural poverty as the son of a farmer. In his view, common prosperity means influencers should reach out to people who have good ideas and help them to join the e-commerce wave. “I hope more people will enter the industry,” Xin said.

He is investing in a team of 50 teachers with the aim of opening a livestreaming school for between 50 000 and 100 000 students a year, potentially in the northern city of Dalian. “I will assess how big the demand is from the society,” he said. “If it’s huge, I will work harder to achieve this.”

He wants to empower more people, including farmers, to build their businesses online.

Xin said he has helped farmers to sell millions of duck eggs through his livestreaming shows — a process which has made him very little money.
“The farmers really don’t know much about packaging, marketing or logistics. So I just painstakingly taught them over and over again, but I couldn’t teach many people by myself,” he said.

“Then in the first half of 2020, I decided that I wanted to open a school to share our ideas, so that they can have more opportunities.”

One downside of the livestreaming industry is that “it has made many people overly rich and they don’t think about how to make other people rich too or how to share with others,” he said. Top livestreamers including Viya have recently been fined millions of dollars for tax evasion.
The livestreaming industry “is supposed to make more underprivileged people get rich,” Xin said.

Going forward, he expects the government to more heavily regulate live e-commerce, which currently lacks clear rules.

“Common prosperity is an ancient Chinese dream,” Wang Yiwei said. “Social justice, great harmony, that’s traditional Chinese culture.” If some people are too rich or too poor, “that’s revolution. Chinese history told us,” he said, adding that Confucius said people shouldn’t fear scarcity, but rather uneven distribution.

Still, pursuing common prosperity isn’t unique to China or an alternative to Western models, Wang said. In his view, it’s also a global phenomenon.

Common prosperity is a drive to be “clean, lean and green,” Wang said. Now that China is the world’s market and not its factory, more growth will come from innovation, design and knowledge-intensive work than from capital-intensive projects.

In Wang’s view, people’s thinking around the definition of “advanced” has changed: The right measure is whether something is suitable or not. He cites “whole-process democracy” — a controversial concept — as an example.

“We will not copy any model from the Soviet Union or the U.S.,” Wang said. “If you just copy, no one will succeed.”

© 2021 Bloomberg

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“The traditional family has long been characterized as patriarchal, patrimonial, patrilineal, and patrilocal, putting women at a severe social disadvantage relative to men.” (Thornton and Lin 1994)
Citizens are expected to subordinate their individual needs, goals, and aspirations to the requirements of the collective. In collectivistic cultures, individuals are seen as embedded within their group identity, and the notion of a separate, autonomous self is de-emphasized. Collectivist societies believe that the means of production should be owned by the collective, and that accountability should be shared.

Sounds familiar? Although this remark provides a valid description of traditional South African society, it was made in relation to contemporary Chinese society.

A democratic system is like a private company. It can only be economically viable, sustainable, and competitive if the voting rights of shareholders come with some form of accountability. People who have voting rights must also have skin in the game. Investors know that short-sightedness and populism at the Annual General Meeting will make the dividend disappear and cause a drop in shareholder value. A private company is the ultimate form of democracy, where shareholders are rewarded or punished in direct proportion to their inputs. Investors who buy preferred stock, also called pref shares, stand first in line for dividends. Holders of pref shares enjoy preferential treatment compared to ordinary shareholders, but they do not have any voting- or participation rights. If they did have voting rights, they would use their vote to declare only enough dividends to pay themselves and skip the ordinary shareholders.

The social grant is similar to a “preferred and special dividend” that is paid out irrespective of economic performance or fiscal constraints. In the case of South Africa, this special preferential dividend is financed with debt that lies on the balance sheet and lowers the equity for all shareholders.

The social grant is a free pref share with full voting and participation rights. This opens the door for everybody who has nothing to lose, to fight, march, demonstrate, burn tires and cause mayhem at the “AGM” to demand a larger dividend on their free pref shares. The problem is that this comes at the expense of the ordinary shareholders who invented the business model, provides the development and working capital, and the employees whose jobs are on the line.

When collectivists, as citizens who do not own property, receive voting rights in the democratic system, they actually received a free, fully participating, preferential share in the economy, with voting rights. They have no skin in the game. They have nothing to lose, but much to gain. They received the power to declare an unlimited amount of dividends to themselves. This is the beginning of the end for this business. The financial health of SOEs and municipalities proves that South Africa has traveled far down this road.

China is an economic miracle that raised 80 million people out of poverty in the last 40 years. The ANC has been in power for 3/4 of this period and our GDP/capita is crashing relative to that of China. South Africans are getting poorer because they have received pref shares that carry voting rights.

The difference between South Africa’s crashing GDP/capita and China’s stellar performance is due to the fact that the Chinese political-economic system pays almost no social grants and “shareholders” have no voting rights. They only have participation rights. The effect is that voters are incentivized to focus on long-term economic growth rather than on short-term populism. The Chinese government does not give away any free, full participation pref shares that carry voting rights because they are intelligent enough to anticipate and understand the consequences.

Social grant’s have actually allowed, the poor of South Africa to participate in the economy. The poor of SA, now have a vested interest in the countries success.

You are against social grants, but you ignore the benefits. How else do you explain the booming township economy, with malls and small businesses prospering?

I would advise you to leave the suburbs and take a drive, to see this for yourself.

The social grant system is a resounding success and needs to be extended to permanently, include the unemployed. And increased to R3500, which is the minimum basic wage.

The reason China has re-implemented “common prosperity” is because of the widening gap between the haves and have-nots.

The Chinese “economic miracle“ has not created prosperity for the majority. It has only resulted in creating a group of one percenters. Leaving 99% of the population to slog in factories, for nothing to show for it.

The back-tracking by the CCP, proves that capitalism has failed yet again, to improve the lives of ordinary people.

Apart from pensioners, the social grants have done little to improve the success of the economy other than by contributing to VAT returns.

Unless you want to embark on a money printing exercise like the US, state funds for distribution come from one source only: taxes. State grantees have little incentive to enter the stage where they begin to pay any tax other than the default VAT. Universal Basic Income may have marginal benefits in welfare type Scandinavian countries, but SA needs the easy access to self-employment with no constrictions of legalase and state interferences.

Once these businesses enter the formal tax base, only then can an economy grow, not from bleeding the current tax payers even more.

I support the concept of a social grant. I am against the legalization of plunder in the form of BEE, tenderpreneurship and cadre deployment. I want everybody te benefit from a growing economy. When the majority earn more from the Treasury than what they contribute to the Treasury, they will vote for higher taxes and more free stuff. In such a situation a democracy is a recipe for economic destruction and unemployment.

I am not against the social grant. The right to vote is the problem. People who have a right to vote should have something to lose. They should own property of their own.

Please read my previous comment for more clarity. A preferential dividend cannot be free and cannot carry voting rights.

@Sensei…You’re advocating that we suspend democracy and move to a plutocracy? This will leave the poor without any representation and in all likelihood, result in unrest.

For instance in Berlin, Germany…85% of residents rent and don’t own property. Should they be refused the right to vote?

While I agree that BEE has its shortcomings, it has provided people of colour opportunities in obtaining jobs, bursaries, university entrance and tenders.

The problem with BEE is not the concept, but the implementation. Most problematic is BEE fronting, which the government has failed to address.

… “ to potentially rule China for life.” Hmmm … where have I heard that before? Stalin, Hitler, Mussolini, Mugabe, Assad, Idi Amin, the Kim crew …. totalitarian dictators all, who eventually destroyed their countries. This is simply a different way of entrenching power over citizens, like East Germany tried but then eventually failed and collapsed. And of course when the going gets tough internally, start a war by appealing to the masses with diatribes of how their efforts to overcome their poverty are being “disrespected” by the West.

The difference between China and the Scandinavian countries which also aspire to a form of socialism is the fact that China is not a democracy and will eventually grind its way to the bottom with a vast ageing population to support out of the current 1.4 billion. But in the meantime, expect stormy weather.

Watch this space.

End of comments.

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