Era of common prosperity shows China is moving forward, despite what the US thinks

China has made enormous progress in the past four decades, but leaders know the job is far from done
Long-term goals executed across multiple generations have led China into an era of moderate prosperity, something the US system cannot match

Lub Bun Chong

Published: 1:30am, 17 Feb 2022

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In 1967, US president Richard Nixon penned an article in Foreign Affairs magazine, urging a strategy of engagement with China and stating that “our goal should be to induce change”.

In 2020, Secretary of State Mike Pompeo asserted that US engagement “has not brought the kind of change inside of China that president Nixon had hoped to induce”. For good measure, Pompeo supported his assertion with a litany of Chinese transgressions, including the oppression of its people.

There appears to be broad political consensus in the United States that China has not changed enough and, worse still, is moving backwards with its recent slate of policies and initiatives.

China is one of the world’s oldest civilisations, and the Chinese governance system predates the US Constitution by thousands of years. Contrary to Pompeo’s observation, China’s fate is inseparable from changes, successful or otherwise, throughout its history.

Chinese leaders are students of history. President Xi Jinping addressed last month’s World Economic Forum in Davos and underlined “the need to learn from comparing long history cycles”.

China’s dynastic cycle has been playing out for more than 4,000 years. A new dynasty brings aspiration and prosperity to the people, but corruption and factionalism hollow out the dynasty and bring hardship, which eventually leads to an uprising or invasion.

The latest manifestation of this is “common prosperity”. But, as Xi warned in 2012, corruption will eventually “doom the party and state”, and so the immediate priority was to contain corruption. A decade later, and after the expulsion of more than 900,000 Communist Party members, the push for common prosperity finally swung into action in 2021.

Property, technology and education sectors were rattled, and international media raised alarm bells, with headlines such as “China’s business crackdown threatens growth and innovation” in the Financial Times. The Chinese regulatory clampdown triggered massive sell-offs, and the MSCI China Equity Index underperformed other comparable major indices in 2021.

To be sure, common prosperity seems at odds with laissez-faire economics and the doctrines of eminent economists stretching back to Adam Smith.

However, it is worth noting that small and medium-sized firms in China contribute 60 per cent of GDP and 80 per cent of urban employment, and they are a crucial stakeholder in common prosperity. Common prosperity is, therefore, a rebalancing rather than the death of the private sector.

What is China’s common-prosperity strategy?

Common prosperity is just starting, but it is evident that China isn’t jettisoning its market reforms. In fact, the opposite is true. China is a member of the recently launched Regional Comprehensive Economic Partnership, the world’s largest free-trade agreement. The group has 15 members, including two members of the Quad, Australia and Japan.

China has made enormous progress in the past four decades, but the country’s leadership also knows the job is far from done.

Just last month, tragic news broke about a case in Xuzhou, Jiangsu province, where a human trafficking victim was raped for years and gave birth to eight children. Less than two weeks later, there were celebrations when Eileen Gu, an American-Chinese skier, competed for China and won gold at the Winter Olympics.

The stark contrast between the horrifying Xuzhou case and celebration of Gu is emblematic of the multitude of serious imbalances that are threatening Chinese society as well as the environment. As Xi put it, common prosperity must “ensure that ecological protection and people’s happiness are enhanced in harmony”.

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Natural snow in Beijing causes delays to Winter Olympics ski slopestyle events

The deliverable for any government is the well-being of the people. The US and China differ on the meaning of people’s well-being, which reflects the importance of individualism and collectivism in their respective societies.

Understanding Chinese governance is vital but lacking in the US. This is unsurprising since the Chinese governance system is unique. It evolved over the course of thousands of years and is profoundly influenced by the Chinese notion of harmony.

Unlike the short US election cycles and their winners and losers, Chinese leaders set long-term goals that are executed across multi-generational leadership. This requires stability to ensure the continuity of reforms.

In 2021, China achieved its first centenary goal of becoming a “moderately prosperous society in all respects”. This endeavour had been pursued through a long cycle of reforms across five generations of leadership spanning Mao Zedong, Deng Xiaoping, Jiang Zemin, Hu Jintao and Xi.

Former US president Donald Trump during a “Save America” rally in Conroe, Texas, on January 29. Trump continues to sow discord as he plots to unseat US President Joe Biden in 2024. Photo: AFP

There were some setbacks, including the Great Leap Forward and the Cultural Revolution, but that did not stop the reforms and Deng ushered in the era of “reform and opening up”.

Reforms must translate to tangible benefits for the people. Contrary to Pompeo’s portrayal of China as an Orwellian state, a Harvard Kennedy School Ash Centre survey showed 93 per cent of the respondents in China were satisfied with the central government in 2016.

There are no perfect governance systems. Every nation has many issues that are unique to its history, philosophy and culture.

China’s overarching imperative is to deliver the well-being of its people and fulfil its obligations as a stakeholder in a multilateral world. Meanwhile, the US is fixated on retaining global primacy, even as a defiant Donald Trump continues to sow discord and plots to unseat US President Joe Biden in 2024.

Common prosperity is now in play. Barring unforeseen difficulties, it is hard to see China turning the clock back to the era of the Great Leap Forward and the Cultural Revolution.

Lub Bun Chong is a partner of C Consultancy and Helios Strategic Advisors, and the author of “Managing a Chinese Partner: Insights From Four Global Companies”