Houze Song, a researcher on Chinese political economy for the Paulson Institute, said his “lecture is that common prosperity is still a flexible concept, and Beijing has not defined and quantified what common prosperity means”.
But the esoteric theory is already having an impact on the market.
Shares in Moutai, one of China’s largest companies, fell sharply after Xi’s speech and have not recovered. Alibaba and Tencent, two of China’s tech giants, both fell 4 percent last week. The Shanghai Stock Exchange 300 Index fell 2 percent.
dr. Willy Lam, an experienced political observer in Hong Kong and a senior fellow at the Jamestown Foundation, said from a Western investor’s point of view, “You wouldn’t get much encouragement from Xi Jinping.”
Mary Gallagher, a professor of Chinese politics at the University of Michigan, said the higher level of state control needed to achieve “common prosperity” increases the chances of further disconnection between China, the US and the West. “That will be quite a challenge for those companies in the middle.”
Gallagher said Xi can use several levers to achieve his goals.
“It could be a real estate tax or a meaningful income tax reform, or it could mean more crackdown on tycoons and technology,” she said.
Gallagher describes Xi’s policies as a form of “mimicking communal prosperity”. “He thinks everyone grows up like him and needs to be reformed through forced labour.” (Xi spent seven years in a cave and worked in rural Shaanxi before climbing the ranks of the party). But he also wants China’s wealthy to give back more to the state, giving him both economic and political control over their fortunes.
“It’s very contradictory,” Gallagher said. “The worst possible outcome is that major institutional reforms are delayed. The economy is going to grow slowly anyway, and because he has promised all these things, he is frustrated. So he launches campaigns like he has in the past against entrepreneurs or against educational technology companies.”
What Xi is trying to achieve has never been done before. No communist state has become more market-driven and has since reverted to a more socialist economy.
He sees the shift as both ideological and practical. China’s golden rivers flowed unevenly in the 1990s and 2000s as crony capitalism and widespread corruption left many ordinary residents feeling like they missed the boom when the state withdrew from social services.
China is now more prosperous, but is facing more economic headwinds than at any time since the 1970s: US restrictions on key parts of the economy (semiconductor chips), a plummeting birth rate and a self-imposed draconian COVID-zero policy.
Former US Deputy Secretary of State Evan Feigenbaum called it “Xi’s big gamble”. “He wants to pursue the new principled contradiction, but within the context of a more statistical, more party-oriented, more disciplined, more self-regulatory and ultimately more Leninist political system,” he said. in a paper for the Marco Polo Institute.
The details can be found in the work report. Xi’s targets no longer state the aggregate output of the world’s second largest economy. They only provide information on per capita income.
Beijing is “quietly abandoning its ambition to become the world’s largest economy,” Song said.
In order to achieve Xi’s vision of common prosperity, China may have to sacrifice its destiny.
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