China urged to ensure stable economy, fix ‘fragile’ wealth accumulation before seeking common prosperity
- Ma Xiaohe, the former head of a government think tank, believes that China’s ‘wealth accumulation mechanism is very fragile’ amid the recent common prosperity drive
- Common prosperity is not a new policy, but President Xi Jinping signalled more robust regulation to narrow the wealth gap during last month’s 20th party congress
China should prevent big fluctuations in economic growth and ensure a sense of security for the middle class as part of its push for common prosperity, according to the former head of a government think tank.
Ma Xiaohe, a former director and a researcher with the Macroeconomic Research Institute within the National Development and Reform Commission, believes China should establish a mature mechanism for wealth accumulation.
Common prosperity is not a new policy in China, but Xi’s comments were the first time Beijing’s top leadership had spoken about managing the means of wealth accumulation.
I think the biggest problem in Chinese society is that the wealth accumulation mechanism is very fragile; one word, one policy, one signal can result in the disruption of wealth accumulation
“I think the biggest problem in Chinese society is that the wealth accumulation mechanism is very fragile; one word, one policy, one signal can result in the disruption of wealth accumulation,” said Ma.
“By taking efforts, we should allow the low income to become the middle income, then turning them into a stable middle class while enabling a part of the hardworking middle class to become the high-income group.”
But the push for common prosperity will not involve a Robin Hood-style redistribution of wealth, and will instead be incremental and preconditioned by steady economic growth, added Ma.
“Never interpret common prosperity as equalising the rich and the poor. It is a blunt mistake,” he told the 2022 Sohu Finance annual conference on Wednesday.
“We should make a big cake first, which is to set up and improve a stable mechanism on incremental wealth accumulation, and then it comes to how to cut the cake.”
He also suggested there have been “unreasonable factors being China’s economic slowdown” over the last 12 years.
It does no good for the common prosperity push, make the cake bigger or accumulate wealth if China’s economy slows too early
“It does no good for the common prosperity push, make the cake bigger or accumulate wealth if China’s economy slows too early,” said Ma, who took part in common prosperity research with the State Council’s Development Research Centre in recent years.
“China should keep the pace of economic growth above 4 per cent during the 14th five-year plan [for 2021-25] and raise the growth rate to 5 per cent over the long run to stabilise the economy at the middle-income advanced economy.
“Currently, the middle income and middle class have a sense of achievement, but not enough safety. Their sense of security should be increased instead of leaving them unstable.”
China’s economy has been struggling under Beijing’s zero-Covid policy, including lockdowns and travel restriction, with the uncertainty also hurting consumption and production confidence.
Beijing’s crackdown on big tech companies and the property market has also slowed the economy and hurt employment.
Ma has proposed a “two-decade doubling plan”, which involves doubling the average income of the poor in one decade before doubling the middle-income group in another.
Lifting China’s middle-income group of around 800 million people would help create a so-called olive-shaped social structure, which occurs when the middle class outnumbers the other two classes in the society.
Ma also said efforts are needed to boost the private sector and innovation in less developed regions to narrow the regional gap.
Further adjustment to China’s population policy is also needed to address the shrinking labour force, he added.
He also proposed several means to assist low-income groups, including skills training, employment support and improving social security, to gradually lift them into the middle class.
