Focus topics

‘Common Prosperity’: Focus on improved worker benefits and social welfare​

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Common prosperity: the Chinese government is determined to create a more equal society

  • Xi Jinping regards “common prosperity” as a path to achieve the Communists Party’s second centennial goal of “building a modern socialist economy” by 2049.​
  • The purpose of “common prosperity” is to reduce social inequality and income gap, to grow the middle-class population and to increase domestic consumption as a future growth driver for China’s economy, thereby stabilizing the Party’s long-term governance.​
  • It is not a campaign designated to crack down on private capital, but to achieve a better balance between growth and social equity. However, the government’s interventionist approach affects private businesses in multiple ways, e.g., with anti-monopoly efforts or hurting education business by trying to reduce educational inequalities.​

Immediate policy priorities are to increase workers’ benefits and improve social welfare

  • Among the dimensions of “common prosperity”, the government will focus on achieving “fairer” market distribution (1st distribution) and improving redistribution through taxes and public service (2nd distribution). Philanthropy (3rd distribution) will be encouraged in the form of voluntary donations but with lesser priority. Strict regulations are expected to improve employee benefits in 2022, especially in the informal economy, for example, car-sharing or delivery services. In addition, the year will likely bring a boost to the scope and level of social services across the country: public education, child care, affordable public housing, and more.
  • In 2022, strong regulations are expected to improve workers’ benefits, especially in the informal economy such as ride hailing or food delivery. In addition, 2022 is likely to bring a push in the scope and level of social welfare across the country: public education, baby care, affordable public housing and more.​
  • Property tax pilots will likely be conducted in several cities, such as Shenzhen and Hangzhou, where real estate prices grew fast and local governments do not rely heavily on land sale revenues. However, due to the policy priority of economic stability in 2022, the pilots will proceed gradually and cautiously.​
  • Recent huge penalties against famous influencer for tax evasion illustrates the government’s plan to tackle all sources of “illegal” incomes by the wealthy population.  ​

In 2022, businesses will feel the burden from higher labor costs, but positive long-term effects lie ahead

  • In the short term, foreign companies in China will face the burden of growing labor costs due to “common prosperity” policies. Also, companies who rely on wealthy Chinese customers may be indirectly affected by increased scrutiny on the rich, e.g. targeted tax inspection campaigns and property tax pilots.​
  • However, in the long term and if China’s “common prosperity” policies prove successful, a growing middle-class with purchasing power and financial security will provide a new customer base for premium products​


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