BusinessChina’s ‘common prosperity’ to have significant effect on private...

China’s ‘common prosperity’ to have significant effect on private businesses

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China’s call for ‘common prosperity’, and associated policies, will have important implications for China’s economy and business, finds a new report from LSE IDEAS, the London School of Economics’ foreign policy think tank.

According to the report, authored by Dr Xin Sun, Senior Lecturer in Chinese and East Asian Business and a member of the China Foresight forum at LSE IDEAS, “Xi’s own words do not provide a straightforward answer to questions raised around the true meaning of ‘common prosperity’.” This has given rise to a range of different interpretations which, while insightful, do not provide a full picture of this political agenda.

China’s call for ‘common prosperity

Dr Sun argues that common prosperity “has more to do with centralising and strengthening the Party’s economic control than improving the welfare system.” The report finds, common prosperity offers a strong interventionist vision that would further strengthen the Party’s control over both localities and the market.

This, the author notes, is likely to have important consequences for Chinese businesses:

“Xi’s centralisation drive weakens the political support for private businesses while increasing their regulatory burdens,” he notes. “Common prosperity and economic centralisation mark a radical change in China’s economic growth model. Decentralised authoritarianism, the institutional foundation of China’s economic miracle over decades, is gone,” he adds.

And, the author notes, common prosperity poses significant risks to China’s economy, arguing that: “Not only is economic growth at risk, but economic centralisation may also amplify policy mistakes and delay their correction.”

china

According to Dr Sun, with so much power concentrated into Xi’s hands, it would be difficult for him to obtain reliable information on policy performance and even more so to admit and reverse policy mistakes.

He also notes the impact of common prosperity, and the ramifications on economic growth and business, on investors, as many have consistently pulled back from the stocks of Chinese companies, “especially those listed in the United States and Hong Kong,” he notes.

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