Xi Jinping and “Common Prosperity”: New Governance Paradigm or Tool to Consolidate Power?

Introduction

During the 6^th Plenum of the 19^th Chinese Communist Party (CCP) Central Committee, held in November 2021, China’s top political leadership passed a “historical resolution” that cements President Xi Jinping’s (习近平) status as a transformative leader and secures his political legacy (People’s Daily, November 11). In reviewing key experiences from the past, the meeting celebrated the achievements of Xi’s rule, praising not only the “efforts to address corruption in both political and economic circles” but also the victory in establishing a “moderately prosperous society” (小康社会, xiaokang shehui) (People’s Daily, November 11). This has paved the way for Xi to move forward with his pursuit of “common prosperity,” a principle that has rapidly become the new leitmotif of his ambitious agenda.

What does the rise of this new rhetoric around “common prosperity” entail for the future direction of Chinese governance in the Xi Jinping era? While the leadership has primarily presented this policy shift as a way to promote social fairness­­—by redistributing wealth in society and bringing the country into a new stage of development—the crackdowns that have ensued also suggest strong political motives underlying the endeavor. 

A New Governance Paradigm For A New Era

The emergence of “common prosperity” as a centerpiece of Xi’s political rhetoric coincided with the 10^th meeting of the Central Financial and Economic Affairs Committee in mid-August (Xinhua, August 17). Xi touted the principle as a “fundamental requirement of socialism and a key feature of Chinese-style modernization,” which in essence, entails creating a better distribution of wealth within Chinese society (Qiushi, October 15).

The phrase ”common prosperity” itself does not constitute a novelty, as it was first introduced by Mao Zedong (毛泽东) in the 1950s in the wake of land reforms and collectivization (China Media Project, August 27; People.cn, December 25, 2018). Deng Xiaoping (邓小平) also envisioned common prosperity as an ultimate goal for the country, albeit prioritizing a policy of “letting some get rich first” (让一部分人先富起来, rang yibufen ren xianfu qilai) in order to spur others to catch up (People’s Daily, August 09, 2019). In contrast, Xi is now building a narrative that posits himself as the core leader with the capabilities to deliver on the ambitious goals set by his predecessors.

In that sense, the turn toward common prosperity carries strong symbolic significance. It officially closes the door on Deng’s Reform and Opening-up era to make way for Xi’s new age of modernity and realizing the “great rejuvenation” of the Chinese nation” (中华民族伟大复兴, zhonghua Minzu weida fuxing) (Qiushi, December 2013). While Deng’s policy framework and economic strategy allowed the country to achieve four decades of exponential economic growth, it also resulted in deep-seated structural imbalances. Notably, in Xi’s view, excessive emphasis on economic growth and its promulgation as the foundation for the regime’s legitimacy were key factors in the emergence of an unsustainable development model, characterized by rampant corruption and systemic inequalities. This pro-growth model also gave rise to collusive relations between the government and corporate spheres, encouraging rent-seeking opportunities and entrenched corrupt practices such as trading wealth for power.

Against this backdrop, Xi’s rhetoric around “common prosperity” and his recent actions can be seen as efforts to correct the negative legacy of preceding eras. In doing so, Xi seeks to direct structural changes that will lay the necessary foundations for the transition to a high-quality development model, underpinned by balanced economic growth, reduced financial risks and increased social fairness.

Xi has already cited the need to rebuild the legitimacy of the party around a new guiding force­­—namely common prosperity. The fact that the leadership abandoned its longstanding practice of setting a Gross Domestic Product (GDP) growth target for the first-time in 2020 is indicative of such a shift. Furthermore, Xi also rebranded the “main contradiction” (主要矛盾, zhuyao maodun) facing the Chinese society from “the ever-growing material and cultural needs of the people and backward social production” to “unbalanced and inadequate development and the people’s ever-growing needs for a better life” (People’s Daily, March 30, 2018).

To carry out this shift toward improved economic sustainability, the leadership has put particular emphasis on reducing China’s substantial income and wealth gaps. After peaking at 0.491 in 2008, China’s Gini coefficient has remained at an average of 0.467 over the past years, a figure above the international inequality alert line of 0.4 set by the United Nations, which evidences enduring inequalities (Finance.sina, August 19; UN Habitat, 2008/2009) [1]. By addressing income inequality, Xi hopes to grow and empower the Chinese middle-class to boost domestic consumption, which will serve as the main driver of future economic growth. This is partly set to be achieved through the implementation of the so-called three distributions (三次分配, sanci fenpei), which compels high-income groups to “give back to the society” through charitable donations (People’s Daily, September 6).

The private sector has been put on the frontline of this new redistribution agenda, with Xi not only ordering a major clampdown on “excessively high income,” but also accelerating efforts to curb the so-called “disorderly expansion of capital” (资本无序扩张, ziben wu xu kuozhang) in several industries including real estate, the internet, technology, digital finance and education (Xinhua, December 27, 2020). These efforts also seek to rein in negative business and financial practices—such as lax corporate governance, unsustainable lending and shadow banking—that have exacerbated volatility over the years (Beijing Local Financial Supervision and Administration, August 23).

The recent anti-monopoly and anti-trust regulations that have hit companies, such as Tencent and Alibaba with hefty fines are part of these efforts (Guancha, November 20). To further break down the oligopolistic market structure, the leadership has simultaneously put forward new measures to support small and medium enterprises, as well as individuals in the business sector (Xinhua, September 1). Authorities have also proposed a property tax pilot scheme, which will be introduced in selected regions over a five-year period as part of a push to rein in rent-seeking practices and speculation in the real estate sector (Global Times, October 23).

The crackdown on the private tutoring and education industry reflects broader efforts to better equalize the distribution of services within society. For example, Premier Li Keqiang (李克强) recently announced initiatives aimed at reducing inequalities in access to education, which include raising the national loan ceiling for students (Xinhua, September 1).

Finally, given that China’s high-income inequality overall derives from significant regional disparities and a longstanding rural-urban gap, the leadership has initiated a growing urbanization drive to promote the “citizenization” of rural residents (NDRC, September 14; ISDP, December 3, 2020).

Reasserting Party Supremacy, Cementing Xi’s Authority

Beyond the economic aspect, the shift to “common prosperity” and the renewed anti-corruption efforts undertaken in its name undeniably reflect Xi’s core political goals and ambitions. Xi himself openly declared that “achieving common prosperity isn’t just an economic issue; it’s a major political matter bearing on the party’s foundation to rule” (Qiushi, October 8). Indeed, neutralizing perceived threats and challenges to regime survival is an enduring concern for the CCP leadership, and consequently, tackling corruption and the ensuing social inequalities are key priorities. Xi has repeatedly warned throughout his tenure that “corruption will doom the party and the country” (腐败最终会亡党亡国, fubai zuizhong hui wang dang wangguo) (Xinhua, November 17). Corruption constitutes a systemic vice that has resulted in rising social unrest in recent years, and therefore poses major threats to the CCP’s legitimacy and long-term stability.

The Chinese leadership’s inordinate fear of social unrest is largely rooted in the trauma caused by the Tiananmen square uprising, which was triggered in part by government corruption. At the same time, in Beijing’s view, the collapse of the Soviet Union, the “color revolutions” in Eastern Europe and the more recent “Arab Spring” uprisings all provide chilling lessons of fates that the CCP leadership is determined to avoid at any cost (Xinhua, February 23).

Xi’s emphasis on common prosperity therefore seeks to eliminate politically threatening “social contradictions” (社会矛盾, shehui maodun) and ensure future social stability. While the anti-corruption struggle that he initiated upon assuming office has already made unprecedented headway in correcting imbalances, leveraging the “common prosperity” drive will allow him to generate fresh momentum for his efforts to rein in corruption and ensure popular support for the regime. The goal is to convey the image of a party steering back toward its socialist roots and its fundamental mission of “serving the people” first.

Nevertheless, the brutal crackdown that has accompanied the “common prosperity” rhetoric cannot veil Xi’s underlying desire to break the vested interests of wealthy private entrepreneurs and force them to toe the party’s line. Indeed, the reform-era growth model allowed private companies and entrepreneurs to accumulate sizable wealth, which they have increasingly leveraged for economic and political clout. Furthermore, many private companies have high-level connections in foreign financial markets and possess vast amounts of strategic data that could be leveraged against the regime. Due to the threats these interests pose to the party and thus to Xi’s personal authority, the new restrictions will increase the CCP’s oversight over the private sphere and compel its influential stakeholders to realign their priorities with those of the party.

Notably, a strong effort is underway to eliminate collusive relations between party-state officials and private entrepreneurs in an effort to weaken the latter group’s political influence. The downfall of Hangzhou Party Secretary Zhou Jiangyong (周江勇) is a case in point. Hangzhou is the capital city of Zhejiang, a province which has been the stronghold for multiple large corporations and influential private entrepreneurs. Although Zhou is part of Xi’s inner circle (his “Zhejiang clique”), it appears that his close relations with Alibaba and Ant Group founder Jack Ma and involvement in Ant Group’s business may have led to his indictment (China Times, August 27). As Xi seeks to transform Zhejiang­­—his core political powerbase­­—into a “Common Prosperity Demonstration Zone” (NDRC, July 29), he has struck hard and made an example of Zhou. This sacrificial probe against a factional ally sends a strong message to other senior officials that collusion with the private sector will not be tolerated in the future.

Finally, as was the case with the anti-corruption struggle, the multi-pronged “common prosperity” crackdowns have also been used by Xi to eliminate factional rivals. A look at those targeted by these actions indicates that an accelerated purge against senior officials and wealthy families connected to the Jiang Zemin (江泽民) faction is underway. Xi continues to reiterate the need to eliminate “the lasting poison” and “lingering influence” of leaders associated with Jiang such as Zhou Yongkang­­—one of the biggest “tigers” to fall in his anti-corruption drive.

This year’s sweeping campaign to purge the political-legal apparatus has helped restore the factional power balance in Xi’s favor (China Brief, September 23). Nevertheless, the financial, entertainment and technology sectors are the last remaining bastions of Jiang’s faction, which partly explains why Xi is targeting these specific areas. In fact, there has been speculation that key members of the Jiang faction provoked China’s severe stock market crash in 2015 to outmaneuver Xi’s faction and undermine his reputation (Epoch Times, July 23, 2015). In the aftermath, the three brokerage companies, CITIC, Guosen and Haitong Securities, were investigated by the Ministry of Public Security for allegedly engaging in market manipulation (Xinhua, May 26, 2017). Since then, Xi has initiated investigations into numerous institutions and officials operating in the financial sector in an effort to reclaim absolute control (Xinhua, September 26).

The most visible sign of this ongoing factional struggle is perhaps the recent encirclement strategy targeting the family and inner circle of Zeng Qinghong (曾庆红), former Vice President and Jiang’s longtime right-hand man (China Brief, October 14). Notably, Xi’s crackdown on the real estate sector and tightened lending rules have hit two high-profile figures connected to Zeng: Evergrande founder Xu Jiayin (许家印) (Epoch Times, October 6) and Zeng Baobao (曾宝宝) —Zeng Qinghong’s niece and founder of the embattled Fantasia Holding Group (Finance.sina, October 9).

Conclusion

In embarking on this new journey toward  “common prosperity”, Xi is signaling a major paradigm shift in China’s governance. This is a departure from the growth model of the Deng era, which, while generating enormous economic growth, also led to widespread imbalances and corrupt practices that threaten the party’s long-term survival. By positing himself as China’s new helmsman, Xi has set out to correct this negative legacy and to usher in a new era of high-quality development, underpinned by balanced growth and social fairness.

Despite Xi’s unfeigned readiness to make systemic changes over the long term, the crackdowns that he has initiated as part of the “common prosperity” drive highlight the political motivations prompting these actions. In the near-term, Xi’s foremost preoccupation is to eliminate highly visible inequality that is detrimental to both social stability and economic growth. If Xi achieves this goal, he will be able to generate stronger popular support for the regime and thus prop-up the legitimacy of its rule. Xi also seeks to leverage the “common prosperity” drive as a vehicle to break the vested interests of private entrepreneurs and companies whose political and economic clout threaten the party’s supremacy.

At the same time, Xi’s targeting of rivals and the business interests linked to them reflects his efforts to remain at the pinnacle of power and to thwart any potential challenges to his political authority. All in all, the historical resolution passed by the party to cement Xi’s authority appears to have given him the necessary political momentum  to strike a decisive blow against his remaining rivals and to clean up the field ahead of the much-anticipated political reshuffling of the 20th National Party Congress (NPC) next year.

Ms. Fatoumata Diallo is a Research Fellow at the Institute for Security and Development Policy (ISDP) in Stockholm, Sweden. She holds degrees in International Conflict studies from Leiden University, the Netherlands and in International Relations and Chinese Studies from the INALCO, Paris. Her research focuses include Chinese domestic politics and governance, EU-China relations, China’s political economy and sociology and non-traditional security.

Notes  

[1] By comparison, the Gini coefficient of EU countries stood an average of 0.30 (OECD, January 26, 2017).