China’s Quest for Common Prosperity: Reading the Tea Leaves

Renewed impetus behind China’s goal of “common prosperity” has raised concerns that Beijing plans a redistribution of wealth that could hurt growth and investment. The reality, however, is more nuanced—and a good deal more positive for China’s long-term growth ambitions.

Common prosperity first became a catch cry in China under Chairman Mao Zedong in the 1950s. Its revival under President Xi Jinping, at a time of heightened regulatory intervention in business, has been interpreted by some as evidence of Beijing’s increasing economic conservatism.

But China today is very different from what it was in the 1950s. Its policy actions can still puzzle outsiders, however, and the task of analyzing them can seem as arcane as reading tea leaves.

The key to understanding China’s new push for common prosperity is to look at it in terms of the country’s modern, growth-oriented economy. To do this, it helps to define what the government means by common prosperity, why Beijing is promoting the idea now and how it fits into the country’s long-term economic outlook.

What Common Prosperity Means

In a speech in August 2021, President Xi said that common prosperity, “rather than being egalitarian or having only a few people prosperous,” referred to “affluence shared by everyone.”

Its aim, in other words, is not to rob from the rich and give to the poor or to hurt growth, but to increase per-capita income and to reduce inequality across income groups and regions. The Display below summarizes the main policy areas that the initiative will target, together with intended actions.